Lenders seize United Kingdom retailer Debenhams, wiping out Ashley

Irving Hamilton
April 9, 2019

Debenhams has more than 15 Scottish stores in areas including Glasgow, Edinburgh, Aberdeen, Dundee and East Kilbride.

Debenhams said in a statement: "The board confirms that it received a revised, highly-conditional, proposal from Sports Direct in the early hours of April 9, which indicated a willingness of Sports Direct to underwrite an equity issue of £200 million".

Various business pundits are predicting Debenhams will enter a pre-pack administration later this morning, effectively giving control of the entity to the hedge fund lenders who control its debt.

The process saw administrators at FTI Consulting appointed before immediately selling Debenhams for stg£101.8m (€117.9), together with debts worth stg£520m (€602m) plus the company's pension obligations.

It clarified that staff, suppliers, pension holders and customers will not be adversely impacted by the administration.

Despite its long history, Debenhams has been battling for survival after a consumer shift online and to cheaper outlets left it with too much retail space on struggling high streets, destroying 90 percent of its share value in the past year.

The restructuring will be brought about through a Company Voluntary Arrangement (CVA), which have been favoured in recent years as shops close stores.

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Debenhams chairman Terry Duddy said: "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".

"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".

Debenhams had on Tuesday rejected a separate rescue bid tabled by the billionaire tycoon.

The news comes after it was revealed that Ashley had made an offer to underwrite a £200 million rights issue, on the condition he became CEO.

Debenhams is expected to go through a pre-pack administration, which would mean current shareholders - including Mr Ashley who owns almost 30% of the chain - would be wiped out. Members can therefore be reassured that the schemes are carrying on as usual.

Mr Charles added: "It is going to be one of the biggest hits the high street has seen so far".

An update from Debenhams is expected later today.

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