Troubled Debenhams gets £40m lifeline from lenders
DEBENHAMS secured a lifeline from some of its lenders, giving the troubled UK department-store chain £40m (€45m) in liquidity as it attempts a broader refinancing.
The company, which operates middle-market stores that anchor many of Britain’s shopping centres, also struck an agreement with export and logistics company Li & Fung on a sourcing partnership for Debenhams’ own-brand products. The deal will help the retailer anticipate trends more quickly and boost quality, CEO Sergio Bucher said in a statement yesterday.
Debenhams is in talks with lenders and landlords as it struggles under about £360m of debt amid dwindling sales. The company issued three profit warnings last year and is closing stores as it’s caught up in the sweeping decline of the UK’s traditional retail hubs.
“The extra lending facility gives Debenhams breathing room, but its renegotiation of leases is seeming more difficult,” said Louise Parker, an analyst at Bloomberg Intelligence.
“The company has been trying to negotiate rent reductions with its landlords for over a year and we have not seen any progress.”
Billionaire investor Mike Ashley, who has a stake in Debenhams, last month engineered a shareholder-vote coup in which he forced out chairman Ian Cheshire and drove Mr Bucher off the board.
The new credit line provides the same amount of financing as Mr Ashley offered to the company last year, which Debenhams turned down.
A company voluntary arrangement, a UK court process that can allow insolvent firms to reach agreements with creditors, along with a debt restructuring may still be the only way for Debenhams to cut its onerous rent bill and remain current on its obligations, according to Ms Parker. The chain plans to have refinanced by the end of the second quarter, according to yesterday’s statement.
Debenhams shares rose as much as 49pc in London, but the rebound comes after a multiyear plunge that’s cut their value by about 96pc since May 2015. The company’s £200m of bonds due in July 2021 were little changed at 50p on the pound, according to data compiled by Bloomberg.
Some of Debenhams’s lenders grouped together to extend the new secured facility, which will be available for 12 months. It will initially charge interest of Libor plus a 5pc cash coupon annually, and will be secured over the assets of the existing guarantors of its revolving credit facility and notes. (Bloomberg)