Debenhams needs Sports Direct's help, despite £200m lifeline
Troubled UK high street brand, Debenhams, has admitted it still needs the help of its biggest shareholder Sports Direct, after it confirmed a £200m facility to keep it going.
The company said it has secured £200m of new money, including £40m to replace the interim borrowing announced on 12 February.
"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”, said Terry Duddy, Chairman of Debenhams.
“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 going forward."
The facilities are for £101 million and £99 million and the company has served a draw down notice for all of the first facility today. Availability of the second facility is subject to the satisfaction of one of a number of milestones being reached by 8 April 2019.
These milestones include Sports Direct or another shareholder holding 25 per cent or more of the company shares, entering into an agreement with the company and its lenders, Debenhams said.
“If these milestones are not 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” the retailer added in a stock market statement.
Sports Direct founder, Mike Ashley, has been trying to install himself on the board of Debenhams and has been making overtures about making an offer for the business.
Risk to Sports Direct's investment
However, if Debenhams doesn’t find a workable solution and the company is forced into the hands of lenders, shareholders, including Sports Direct, could see their stake in the high street brand wiped out.
Debenhams said that the possible offer announced by Sports Direct on 25 March 2019 did not provide a solution to the group's immediate working capital needs, and the board could find no way for the group to continue to trade until such time as the offer, if made and successful, had closed.
“The company therefore had no implementable alternative to its well-developed plans to enter into the facilities in order to protect the interests of its broader group of stakeholders including employees, pension holders, suppliers and lenders.”
Debenhams did add that Sports Direct could still safeguard its investment: “By entering into the facilities there is provision for Sports Direct to participate in a comprehensive solution, and we will be contacting Sports Direct to outline once again the terms on which their constructive participation would be possible if they wish to participate.”
Welcome to Prolific London
The new home for all the latest creative, marketing and technology news