Debenhams locks in GBP 200 million funding lifeline

Debenhams has secured a GBP 200 million cash injection as a way to save the business and stave off a takeover campaign led by Mike Ashley and Sports Direct. The embattled department store retailer has successfully locked in bigger-than-anticipated borrowing

  • Debenhams has secured GBP200m worth of funding
  • Retailer was originally seeking GBP150 million
  • Confirmed on Friday morning

Debenhams has secured a GBP200 million cash injection to help save the business and stave off a takeover campaign led by Mike Ashley and Sports Direct.

The embattled department store retailer has successfully locked in bigger-than-anticipated borrowing facilities after striking a deal with its existing lenders and noteholders.

It said the funding would “provide liquidity headroom” and “deliver stability for its customers, staff, suppliers and pension holders”.

The retailer said it would also pursue restructuring options to “secure the future of the business”.

However, it warned some of the options could result in no equity value for its current shareholders.

Earlier this month, Debenhams said it was in advanced stages of securing a EUR 150 million refinancing deal from lenders ahead of a rent deadline that falls next week.

However, that figure had grown to EUR 200 million.

Without the fresh capital, the 206-year-old department store business could have fallen into administration.

Sports Direct had also offered an unsecured loan of EUR 150 million to Debenhams which was subject to conditions, such as installing Ashley as Debenhams’ new chief executive, and increasing its stake in the department store to 35 %.

According to Sky News, Debenhams lenders had ruled out accepting Sports Direct’s offer after Debenhams said it would consider accepting it.

However, in response to the news that Debenhams secured the EUR 200 million lifeline, Sports Direct has offered to acquire its Danish business Magasin Du Nord for EUR100 million.

Under the proposal, Debenhams would have a 12-month option to buy back Magasin Du Nord at the price at which it was sold to Sports Direct.

As part of the deal, Sports Direct has again proposed that Ashley would become a director and the Chief Executive of Debenhams to assist the retailer through its restructuring process.

The news comes a day after Ashley requisitioned a meeting of Debenhams shareholders as part of a renewed attempt to give the boardroom a clean sweep and install himself on it.

Ashley issued a statement to the market with the formal request after his first attempt on March 7 was foiled by a technicality, because Sports Direct’s shares in Debenhams are held by a third-party nominee.

Ashley – who has a stake of 29.7 % in the department store retailer through his Sports Direct retail empire – has ambitions to install himself on the board and remove all other members except finance boss Rachel Osborne.

As part of his proposal, he would step down from his position as Sports Direct chief executive, to be replaced by deputy finance boss Chris Wootton in an acting capacity.

Earlier this year, Ashley successfully led a coup to oust Debenhams Chairman Sir Ian Cheshire from the boardroom. Cheshire subsequently resigned.

The same coup also saw Sergio Bucher ousted from the boardroom, but he was permitted to continue carrying out his duties as Debenhams chief executive.

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