Debenhams seeks lifeline from banks
DEBENHAMS is closing in on a deal with its lenders to save it from collapse.
The troubled department store is racing to secure a debt lifeline from creditors and hopes to announce an agreement as early as Monday.
But it would only be a temporary reprieve before a major rent payment is due on March 25.
The company is also pursuing a controversial restructuring plan called a Company Voluntary Arrangement (CVA) that will allow it to get chunky rent reductions from its landlords and close a swathe of stores. Debenhams is looking to shut 20 shops by the end of 2019 but the total could rise to 90 in the coming years.
But if it does not manage to strike a deal, Debenhams will struggle to pay its bills and could even fall into administration.
Although many of its stores are trading profitably for now, Debenhams is sitting on a swelling £321m debt pile.
The 240-year- old retailer has been described as ‘a bomb waiting to go off’ after its former private equity owners saddled it with debt and made it difficult to close stores due to onerous leases. In December, it confirmed plans to close 50 stores after suffering the biggest loss in its history of almost £500m.
But it is now thought it could close as many as 90 shops. Debenhams is pursuing the restructuring deal after failing to negotiate with landlords over store closures.
It has been a torrid year for the company, which saw it battle to fight off a takeover by Sports Direct owner Mike Ashley.
Ashley, 54, has a near 30pc stake in Debenhams and has suggested it should merge with rival House of Fraser, which he bought out of administration for £90m. The tracksuit tycoon launched an audacious boardroom coup to oust top bosses last year after Debenhams refused his offer of a £40m to re-invigorate the business.
Retail veteran Sir Ian Cheshire was forced to step down and chief executive Sergio Bucher gave up his board position following the dramatic showdown.
Ashley intervened after Debenhams issued three profit warnings in 12 months causing its shares to slump more than 85pc. Its shares are worth just over 3p. Debenhams declined to comment.