Department store chain Debenhams has tumbled into administration and the retailer’s lenders have seized control of the company.
A stock market announcement has revealed that FTI Consulting has been appointed to carry out the process – but the firm insisted that stores will continue to trade as normal.
Administrators immediately sold the group to a newly-incorporated company controlled by Debenhams’ lenders, including hedge funds thought to include Alcentra, Angelo Gordon and Silver Point Capital.
Under new ownership, Debenhams will have access to £200m in emergency funding – but a restructure is planned which is expected to lead to 50 store closures and job losses, as part of a Company Voluntary Arrangement.
The firm said the transaction delivers continuity for all group operations and was in the best interests of the group’s creditors, employees, customers, pension holders and suppliers.
Shareholders, however – including Mike Ashley who owns just under 30% – are likely to be lefy empty-handed.
In the market note, Debenhams said: “The recovery, if any, to the plc’s shareholders will depend upon the outcome of the sale process which must see full repayment of the Group’s debt. At this stage we do not expect that there will be a distribution to the plc’s shareholders.”
Trading in the shares of the plc has been suspended since 8am this morning and will be cancelled with effect from 8am tomorrow, April 10.
The announcement comes hours after a second, revised offer from Mike Ashley’s Sports Direct, to underwrite a £200m rescue bid, was knocked back by the ailing chain, which has stores in Newcastle, Gateshead, Sunderland, Stockton and Middlesbrough.
The market note said: “While Sports Direct International has made a number of highly conditional proposals, each of which was fully considered by the plc board, none were deemed deliverable given conditionality, timing and other stakeholder obligations and considerations. As these milestones in the New Money Facilities were not met, the Administrators were appointed.
“The administrators concluded that the transaction was in the best interests of the plc’s creditors.
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“Furthermore, it minimises business disruption and provides ongoing access to funding, ensuring continuity for the Group’s operating businesses, lenders, suppliers, employees, pension holders and customers.”
Debenhams said its has undertaken a thorough review of its store estate and plans to proceed with a restructuring of the estate, which, “if approved will result in a significant overall reduction in the Group’s rent burden and underpin a sustainable future for the group.”
Terry Duddy, Debenhams’ chairman, said: “It is disappointing to reach a conclusion that will result in no value for our equity holders. However, this Transaction will allow Debenhams to continue trading as normal; access the funding we need; and proceed with executing our turnaround plans, whilst deleveraging the Group’s balance sheet. We remain focused on protecting as many stores and jobs as possible, consistent with establishing a sustainable store portfolio in line with our previous guidance.
“In the meantime, our customers, colleagues, pension holders, suppliers and landlords can be reassured that Debenhams will now be able to move forward on a stable footing. I would like to thank them all for their recent and continuing support.”
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