Struggling UK department store retailer Debenhams has completed its GBP200m (US$263m) refinancing in a move chairman Terry Duddy claims “secures the future of the Debenhams business.”
In a statement today (29 March), the retailer confirmed it has put in place new facilities with its existing lenders. These provide the group with facilities totalling GBP200m of new money, including GBP40m to replace the interim borrowing announced on 12 February.
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“We are pleased to have agreed this comprehensive funding package which secures the future of the Debenhams business and provides reassurance for Debenhams’ employees, pension holders, suppliers, lenders and other stakeholders,” Duddy says.
However, while the retailer has preserved a route for its shareholders to participate in the future of the business, “this requires the support of our major shareholder” – one Mike Ashley.
Earlier this morning, the retail tycoon and Sports Direct boss released a statement in which he blasted Debenhams’ advisors after the retailer received the green light to proceed with its refinancing plan yesterday – a move that was initially deemed likely to wipe out Sports Direct’s near 30% equity stake along with those of all other shareholders.
“Now the results of the vote are known and we have also been subsequently advised that the supportive HSBC are no longer part of Debenhams RCF, I think that if there were any justice in the world the majority of the advisors would be put in prison,” he said.
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By GlobalDataDuddy says Debenhams will now move to the next phase of its restructuring, which includes reducing rents and reshaping its store portfolio. “These actions are necessary to ensure the strongest possible platform to support the business going forward,” he says.
The new deal will make GBP101m available for Debenhams to draw down now, with the remaining GBP99m facility depending on a series of options taking place by 8 April. These include Sports Direct, or another shareholder holding 25% or more of the company shares, entering into an agreement with the company and its lenders with a firm offer for the retailer, including refinancing Debenhams debt.
Another option is for Sports Direct to drop its control bid, which would see the removal of all of its current board members, other than chief financial officer Rachel Osborne, and agree to either underwrite a rights issue by the company or provide funding by way of a subordinated debt instrument on terms agreed with the group’s lenders and noteholders.
If these milestones are not satisfied, the second facility would be available to the group’s subsidiaries only upon transfer of those subsidiaries into the ownership of a lender-approved entity. While this outcome would ensure the stability and continuing trading of the group’s operating subsidiaries, Debenhams warned it would “very likely” result in no equity value for the company’s current shareholders.
