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Debenhams boosts debt headroom by £40mln with new facility

The new facility also eases some of the restrictions on the department stores’ existing £286mln net debt load
Debenhams
Refinancing talks are progessing

Debenhams PLC (LON:DEBS) has set up a new a 12-month loan facility with existing lenders that gives it an additional £40mln of headroom to agree on a refinancing. 

The new facility also eases some of the restrictions on the embattled department stores’ existing £286mln net debt and will be a bridge to facilitate a broader refinancing and recapitalisation.

READ: Debenhams interim chair reportedly shortlisted for top job at Moss Bros

Terms of this new facility are Libor plus 5%.

Debenhams turned down the offer of £40mln of additional money in December from Mike Ashley’s Sports Direct PLC (LON:SPD).

Sports Direct has a near 30% stake in Debenhams but the department store said there were too many conditions attached.

That led  Newcastle United owner Ashley to write to chief executive Sergio Bucher stating that Debenhams had ‘zero chance of survival without his money’.

Ashley also orchestrated the removal of chairman Ian Cheshire and Bucher from the Debenhams’ board at January's AGM.

Bucher, who remains CEO but without a board seat, said the new facility was the "the first step in our refinancing process".

Talks over a full debt restructuring are ongoing and Debenhams expects to have concluded this in the second quarter of this year, he said.

A partnership with leading sourcing group Li & Fung was also announced today, which Bucher said was another key part of its turnaround plan

“It gives us access to state-of-the-art technology in the LF Digital platform, providing end-to-end visibility across our supply chain.” 

Shares jumped 32% to 4.2p on news of the additional funding, but some analysts suggested it might be little more than a sticking plaster.

" It would appear this extra facility will cover the rent payment due at the end of March, but we also need to see progress on a proposed CVA to deliver an accelerated store closure programme," said Neil Wilson, chief market analyst for Markets.com.

"The only problem is 20% of almost nothing doesn’t amount to a hill of beans and shares remain on the floor. At present, it still looks like Debs is prepared to go to accept help from Mike Ashley and Sports Direct.”

Debenhams has been hit by poor trading condtions acorss the whole high street. Sales were weak at Christmas though current year profits were in line it said in January. 

Group like-for-like sales for the 6 weeks to 5 January fell by 3.4%, with UK sales down 3.6%.

 

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Debenhams Timeline

Newswire
November 11 2015
Newswire
October 23 2014

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