The group said its board believes the planned fundraise will provide “additional liquidity” and result in the “optimal capital structure”.
Debenhams expects the fundraise to reduce its net debt to adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) ratio to less than 2x within FY27.
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Currently, its board is engaged in “advanced discussions” with the group’s lending syndicate, aimed at improving covenant terms and increasing financial flexibility for the ongoing turnaround and growth initiatives. These revised loan terms are contingent on the successful completion of the planned fundraise.
Directors Dan Finley, Mahmud Kamani, and Iain McDonald have each signalled their intention to take part in the proposed fundraising, subscribing at an issue price of 20 pence per ordinary share.
The company intends to consult with institutional shareholders in the coming days before formally launching the fundraising process.
Debenhams’ board maintains its confidence in delivering £50m in adjusted EBITDA in the financial year ending February 2026, in line with previous guidance from the company’s trading update released on 28 January 2026.
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By GlobalDataExpectations also remain for double-digit adjusted EBITDA growth during the following financial year.
The group reports ongoing improvements in gross merchandise value trends during the fourth quarter and continued progress in reducing operational costs.
Cost reduction measures have resulted in a fixed cost exit rate of £130m for FY26, down from £175m.
The board reports that all brands under the group are trading profitably on an adjusted EBITDA basis.
Following a turnaround at PLT, which is no longer classified as an asset held for sale, Debenhams continues to explore avenues for deleveraging and working capital management. These include strategic IP licensing, supply chain partnerships, alternative capital financing options, and disposal of non-core assets.
Furthermore, the board believes that implementing the planned fundraise will lead to what it describes as an “optimal capital structure” and “the most economic financing.”
Additional liquidity from both the fundraising and amended loan terms will support continued progress towards transitioning to a more asset-light business model.
Cash lease costs are projected to decline from £17m in FY26 to approximately £13m in FY27, with further reductions expected after exiting a vacant US property lease.
The company also forecasted capital expenditure to decrease from around £16m this year to £8m next year.
Depreciation is expected to fall from about £51m currently to around £37m following the sale of Burnley.
Interest costs are anticipated to decrease as leverage reduces, and working capital is expected to become marginally cash flow positive by FY27. The board also forecasts a significant reduction in exceptional items over the next two years.
“As a result of this simplification of the Group’s business, the Planned Fundraise, the continued focus on improving and growing the asset-lite marketplace model, and the resulting impact of significantly improving the group’s cash generation, the directors remain confident in the outlook for FY26 and FY27,” the company said in a statement to the London Stock Exchange.
In November last year, Debenhams reported a return to profitability across all of its brands during the first half of its 2026 financial year (H1 2026), with improvements in adjusted EBITDA and reductions in statutory losses and net debt.
