Debenhams has confirmed it is in “advanced” talks to secure a £150m cash lifeline as part of a bid to stay afloat, days after Sports Direct chief executive Mike Ashley sought to oust the retailer’s board and take control.
Debenhams is struggling under a £500m mountain of debt and last week issued its fourth profit warning in little over a year.
Around £40m of the new funds would go towards refinancing a bridging loan secured in February, Debenhams said. Under the retailer’s turnaround plans 50 stores will close.
Debenhams’ share price jumped on Friday after Mr Ashley revealed an aggressive takeover plan.
The billionaire retailer said he would step down as chief executive of Sports Direct to take a senior role at Debenhams if the department store chain’s shareholders vote in favour of his plans.
He also called for the ousting of all but one of the Debenhams board, with finance chief Chris Wootton stepping up to become acting chief executive.
Under the proposals, Mr Ashley would take executive control of Debenhams without having to stump up the cash to buy the 70 per cent of shares that Sports Direct does not own.
Sports Direct, which owns 30 per cent of Debenhams, said it would provide more detail on its rationale for the radical shakeup in due course.
In a profit warning last week Debenhams warned that it would miss forecasts because of difficult trading conditions and wider economic uncertainty.
Like many retailers it has faced tough competition from online retailers, falling numbers fo visitors to UK high streets, rising rents and increases to the minimum wage.
Debenhams chief executive Sergio Bucher hopes to cut costs by closing underperforming stores while at the same time invest in the company’s online offering.
Debenhams announced last month that it had reached an agreement with Hong Kong firm Li & Fung to oversee supply chains.
The new partnership will give Debenhams access to technology that will improve its business and become “a key part of our turnaround plan”, said Mr Bucher.
“It gives us access to state-of-the-art technology in the LF digital platform, providing end-to-end visibility across our supply chain,” he said.
“This will help us anticipate and respond more quickly to trends and our customers’ preferences, as well as delivering better quality product.”
