Debenhams secures £200m refinancing lifeline

Debenhams has secured a £200m refinancing deal with its existing lenders. The new finance includes £40m to replace the interim borrowing announced on 12 February. The facilities are for £101m and £99m and the company has already served a drawdown notice for the full amount of the first facility. Debenhams will be able to draw down the second facility of £99m only if it satisfies one of a number of milestones that it needs to reach by 8 April. These milestones include Sports Direct or another major shareholder agreeing a firm and binding offer for Debenhams (including arrangements to refinance the group debt). Alternatively, Sports Direct could cancel its request to convene an EGM to appoint Mike Ashley as chief executive of the retailer and provide funding for Debenhams through a loan such as a “subordinated debt instrument”. If neither of these milestones is satisfied, the second facility would be available to the group’s subsidiaries only upon transfer of those subsidiaries into the ownership of a lender-approved entity. Debenhams said that this outcome would ensure the stability and continued trading of the group’s operating subsidiaries, with no disruption to the group’s business, customers, employees, pension holders, suppliers or operations, but it would very probably result in no equity value for the company’s current shareholders. As a result of entering into these agreements, Debenhams said, Sports Direct would be able to participate in a delivering a rescue plan for the business and it would be contacting Sports Direct “to outline once again the terms on which their constructive participation would be possible, if they wish to participate”. In addition, Debenhams said it had carried out a review of its store estate and that, if approved, it planned to proceed with a restructuring that would result in a significant overall reduction in the group’s rent burden. The firm said this reduction in its stores was a critical component of the group’s restructuring plan. Debenhams has also confirmed that it has received a number of proposals in recent weeks from Sports Direct that have purported to provide a solution to the group’s financial challenges, but the firm’s board has judged that none of these has provided or been compatible with a comprehensive solution for the business. These proposals include the most recent offer, announced on 25 March, under which the board could find no way for Debenhams to continue to trade during the period it would take to complete the deal as there was no solution for its immediate cash need. Debenhams chairman Terry Duddy said: “We are pleased to have agreed this comprehensive funding package, which secures the future of the Debenhams business and provides reassurance for Debenhams’ employees, pension holders, suppliers, lenders and other stakeholders. We have also preserved a route for our shareholders to participate in the future of the business, but this requires the support of our major shareholder. “We will now move to the next phase of the restructuring of the business, which includes reducing rents and reshaping our store portfolio, as we have referenced in previous announcements. These actions are necessary to ensure the strongest possible platform to support the business.” To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette