Proactive Investors - Run By Investors For Investors

Debenhams in advanced talks for extra £150mln from lenders amid Mike Ashley power grab

Last week Mike Ashley unveiled a plan that would see him leave Sports Direct and take the helm of Debenhams
Debenhams
Debenhams issued its fourth profit warning in 15 months last week

Debenhams PLC (LON:DEB) said it is in advanced talks with lenders for a £150mln lifeline as Sports Direct’s Mike Ashley tries to take charge of the struggling department store chain.

The company said £40mln of the loan would be used to refinance a bridge facility announced in February to ease restrictions on its existing £286mln net debt.

READ: Debenhams “disappointed” with Mike Ashley’s latest grab for power

Last week Ashley unveiled a plan that would see him leave Sports Direct and take the helm of Debenhams.

Sports Direct is a major shareholder in Debenhams with a 29.7% stake in the group.

Ashley proposed sacking all of Debenhams’ board members except for chief financial officer, Rachel Osborne, and appointing himself to an “executive role”.

He has requisitioned a general meeting where shareholders will vote on the proposals.

Debenhams said it was disappointed by Ashley’s attempt at a boardroom power grab and was looking at its options to strengthen its balance sheet.

Ashley announced his plan after the retailer issued a profit warning earlier the same week, blaming macroeconomic uncertainties, increased financing costs, and additional working capital needs.

READ: Debenhams sinks as it throws out January profit guidance

It marked the fourth profit warning from the chain in the last 15 months, having issued three in 2018 as high street retailers continue to suffer from a shift online as well as a consumer spending squeeze.

In morning trading, shares rose 1.5% to 3.59p.

Analysts at Peel Hunt said: "While the frequency of updates has moved up a notch following the recent moves by Mike Ashley to oust the current board at a forthcoming extraordinary general meeting, we still expect the solution to be driven by a company voluntary arrangement (CVA) and wider balance sheet restructuring, which will involve some form of highly dilutive equity fundraise."

A CVA -- a type of insolvency process that allows a business to close stores and negotiate lower rents on remaining sites -- has been carried out by a number of retailers in the past year including New Look, Carpetright, Mothercare and House of Fraser.

View full DEB profile View Profile

Debenhams PLC Timeline

Related Articles

H&T
Tue
"The group's performance over the past three years demonstrates the continuing success of our strategy to access more customers and markets," said chief executive John Nichols.
drainpipes
Thu
Company is looking for more acquisitions after integration of Metro Rod
medical imaging graphic
11:06
Here we take a closer look at the imaging and diagnostics firm IQ-AI Limited (LON:IQAI)

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use