Debenhams enters into administration
Written by Hannah McGrath
Debenhams has entered into a pre-pack administration deal and passed into the hands of its lenders.
The struggling High Street retailer suspended shares this morning after rejecting a revised offer from Sports Direct chief executive Mike Ashley, aimed at preventing the retailer from entering into a £200 million refinancing deal which will see shareholder value wiped out.
Shortly after 11:30am, the department store announced that administrators had been appointed to sell the group, after a £200 million funding lifeline was agreed with lenders.
It added that Debenhams' operations would continue to trade as normal. FTI Consulting has been appointed as joint administrator.
Terry Duddy, Debenhams’ chairman, said: “It is disappointing to reach a conclusion that will result in no value for our equity holders, however, this transaction will allow Debenhams to continue trading as normal; access the funding we need; and proceed with executing our turnaround plans, whilst deleveraging the group’s balance sheet.
He added: "We remain focused on protecting as many stores and jobs as possible, consistent with establishing a sustainable store portfolio in line with our previous guidance."
This morning, the struggling department store chain said that an improved offer from Ashley to boost his support for Debenhams to £200 million for underwriting a rights issue from shareholders was not enough to persuade its lenders to halt plans to restructure the company’s finances, which are due to be agreed today.
The deal has previously been met with fierce opposition from Ashley, who has fought an increasingly acrimonious battle to seize control of the company, including the latest offer of financing being on condition that he be made chief executive of Debenhams and that all but one board member dismissed.
Yesterday, the saga took a bizarre turn when Ashley called for two Debenhams directors to undergo a lie detector test in order to prove their recollections of a meeting held to discuss Sports Direct’s role as the largest shareholder in the company.
In an earlier statement this morning, Debenhams confirmed that the “relevant milestones” necessary for the board to agree an alternative deal with Sports Direct “were not met by the relevant deadline”, meaning lenders were unlikely to allow Debenhams to seek more time for new credit facilities.
“The board confirms that it received a revised, highly-conditional, proposal from SDI in the early hours of 9 April, which indicated a willingness of Sports Direct to underwrite an equity issue of £200 million. The company’s lenders have confirmed to the company that the proposal, on the terms set out, was not sufficient to justify an extension to the 8 April deadline.”
Shares were suspended shortly after.
Debenhams currently has 165 stores and 25,000 staff members, but has announced plans to close 50 stores over the next five years, putting 4,000 jobs at risk.