Debenhams gets breather with £40m cash injection
STRUGGLING Debenhams today got some breathing space after it secured a £40 million cash injection to try to turn itself around.
The debt-saddled department stores chain, which warned on profits three times last year, raised the funds from its banks and bondholders. The loan is on top of borrowing of £520 million.
The immediate £40 million of extra headroom will help it to pay its rent bill, due at the end of March, until it lands a more permanent funding arrangement. Its annual rent bill is estimated at around £220 million.
Investec’s Kate Calvert said: “This shows that ongoing discussions with its existing lenders are constructive.”
The news sent the shares up 33%, or 1p, to 4.1p.
Debenhams also said it will begin working with Hong Kong-based business Li & Fung to help it get its own-brand wares in stores quicker and improve profit margins on the back of it.
It is planning to shut up to 50 stores over the next three to five years, putting 4000 jobs at risk as it struggles with increased competition from online rivals, a slump in sales and rising costs.
Of those stores, however, around 20 could be shut this year via a company voluntary arrangement, a deal that could also allow it to negotiate chunky rent reductions.
In December, Debenhams snubbed a £40 million loan offer from Sports Direct tycoon Mike Ashley, who has a near 30% stake in the business, thus preserving its independence.
But Ashley then led a dramatic boardroom coup, voting the chairman and chief executive off the board. Sergio Bucher, who remains chief executive, but without a board seat, said today’s loan was “the first step in our refinancing process”, which could be a debt-forequity swap.
It posted a record pre-tax loss of £491.5 million last year and it recently said sales had fallen sharply over Christmas.