Friday, 19 April, 2019

Debenhams on brink of administration after rejecting Mike Ashley offer

Debenhams rejects €175m rescue bid Debenhams rejects €175m rescue bid
Priscilla Morrison | 09 April, 2019, 18:32

Lenders to Debenhams said the latest proposal, on the terms set out, including that Mr Ashley be made chief executive of the chain, was "not sufficient".

It will see stores continuing to trade as normal for now, but shareholders including Sports Direct will be wiped out.

Various business pundits are predicting Debenhams will enter a pre-pack administration later this morning, effectively giving control of the entity to the hedge fund lenders who control its debt.

Debenhams said on Tuesday it had rejected a last-minute offer by shareholder Mike Ashley to underwrite an increased 200 million pound ($262 million) rights issue, meaning it is likely to fall into the hands of its lenders shortly.

The new offer from Sports Direct would have seen the company underwrite the raising of £200m by issuing new shares, higher than its previous proposal.

It means all of its 165 stores will continue trading as normal for now - but this has not allayed fears that outlets will be shut and jobs will be lost in the near future.

The company's chairman, Terry Duddy, said: "It is disappointing to reach a conclusion that will result in no value for our equity holders".

Debenhams said in a statement on Tuesday that offer was not sufficient for the lenders.

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Eleanor Snow, Which? consumer rights editor, said: "Debenhams has always been a staple of the British high street so this is a worrying time for its customers and they may find their consumer rights are affected".

The administration is another blow to a retail sector already reeling from the collapse of BHS, electronics firm Maplin, department store House of Fraser and cycle shop Evans.

Debenhams is expected to go through a pre-pack administration, which would mean current shareholders - including Mr Ashley who owns almost 30% of the chain - would be wiped out.

"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".

The administrators said the lenders would now look to sell the business as soon as possible.

Towards the end of 2018, the chain announced it was increasing its store closure plans from 10 to 50 over a three to five-year period.

In April past year, the company announced an 84.6 per cent drop in its pre-tax profits, blaming the "Beast from the East" for disturbing much of the footfall.

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