Debenhams secures £200m lifeline

Embattled department store Debenhams has confirmed it has secured a £200m refinancing lifeline.

The funding is expected to “provide liquidity headroom” for its future funding needs and “deliver stability for its customers, staff, suppliers and pension holders”.

Earlier this month, the company said it was considering a £150m cash injection from shareholder and retail tycoon Mike Ashley, who said he would step down as director and chief executive of Sports Direct to appoint himself director and CEO of Debenhams if accepted, increasing his 29.7% stake to 35%.

The department store seems to be avoiding this outcome as before the offer was made, Debenhams was in discussions to secure £150m from its lenders after Ashley revealed he wanted to take control of the company.

Yesterday (21 March) Sports Direct held another meeting to appoint Ashley to the board of directors of Debenhams and remove all current members except Rachel Osborne, who was appointed in September 2018. Its initial attempt was described as “invalid” as Sports Direct held its shares through a third party nominee at the time. Sports Direct said it wanted to put the vote to Debenhams shareholders “as soon as possible”.

Chairman Sir Ian Cheshire was ousted in January by Ashley after he was voted off the board by 43% of shareholders; CEO Sergio Bucher narrowly escaped the re-election vote with 44%.

In an attempt to gain control, Sports Direct released a statement today which said in order to assist Debenhams with its short term liquidity requirements, it was offering to acquire Magasin Du Nord, Debenhams’ Danish business. Magasin Du Nord had been put up for sale last year, and Sports Direct offered to purchase the business for £100m cash consideration.

Under the proposal, Debenhams would have a 12 month option to buy the company back at the price at which it was sold. The department store would also have the right to continue to market the business, “gaining the benefit from any uplift above the initial sale consideration were it sold to a third party in that 12 month period.”

However, earlier today (22 March), Debenhams launched a consent solicitation for holders of 5.25% senior notes due 2021. This seeks consents to certain amendments to the existing notes.

It said: “Among the changes sought are permissions required to allow the company to put in place new money facilities on a secured basis of up to £200m from its existing lenders and noteholders; to put in place inter creditor arrangements; to give consent to the grant of collateral to support certain of the company’s existing indebtedness; and to seek certain waivers and amendments to the notes that are a condition to putting in place the new money facilities.

“A successful consent solicitation would allow the company to enter into new money facilities and give Debenhams the ability to pursue restructuring options to secure the future of the business. However, certain of these options – if they materialise – would result in no equity value for the company’s current shareholders.”