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Pension deficit concerns prompts downgrade of Debenhams


Debenhams has been downgraded from “overweight” to “equalweight” by major bank Morgan Stanley amid concerns about the department store’s pension deficit.

The bank also slashed the retailer’s price target from 95p to 70p.

The news comes as the high street chain prepares to release its preliminary report next week and as Sergio Bucher moved into the chief executive’s office yesterday.

“We expect the operating results to be routine,” Morgan Stanley said.

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”We are concerned, however, that these may be overshadowed by the emergence of a material pension deficit.

“Factoring in a £250 million pension deficit into our valuation work reduces our estimate of fair value from circa 95p to circa 70p per share, highlighting how geared Debenhams’ equity value has become to even small changes in assumptions.”

The bank highlighted that the price target and rating were “heavily dependent on the assumption that a £250 million pension deficit will emerge”.

However, Morgan Stanley said its estimates could be wide of the mark due to a lack of visibility on scheme’s underlying assets.

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Published on Tuesday 18 October by Elias Jahshan

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