// Debenhams is now reportedly considering a pre-pack administration as an option
// The department store is in the midst of a refinancing campaign to keep it afloat
// Pre-pack option is thought to have been prompted by Sports Direct’s takeover campaign
Debenhams is reportedly eyeing a potential pre-pack administration as a way to save the business and stave off a takeover campaign led by Mike Ashley and Sports Direct.
According to The Sunday Times, the pre-pack option is said to be a fall-back option amid growing boardroom tensions between Sports Direct and Debenhams.
A pre-pack administration is an insolvency process that a company entering administration and then selling it immediately to a connected party, such as a lender, while shedding most of its liabilities.
READ MORE:
- Debenhams considers Sports Direct’s £150m loan offer after FCA escalation
- Debenhams refinancing talks advances amid Mike Ashley dispute
- Debenhams shares jumps 40% as experts react to Mike Ashley’s proposals
- Mike Ashley pushes nuclear button on Debenhams board
- Debenhams shares plunge 12% amid fresh profit warning
- Debenhams secures £40m cash injection to ease funding crisis
Pre-packs also do not require shareholder approval.
The news comes as Debenhams continues negotiations with lenders to secure a £150 million lifeline to help keep the department store retailer afloat. It recently confirmed it was in advanced stages.
If successful, a pre-pack administration may not be necessary as the retailer would then be able to explore other refinancing options for its remaining debt.
Sources speaking to The Sunday Times said the main focus was to lock in a deal with lenders before it meets with Sports Direct, its biggest shareholder, next month.
Debenhams has not commented on the news.
Last week, the department store said it would consider a proposal from Sports Direct to provide a £150 million unsecured loan, in exchange for installing Ashley as Debenhams’ new chief executive.
The proposal came less than 24 hours after Sports Direct revealed it had flagged department store to the Financial Conduct Authority and publicly accused it misleading the market on its communication of the health of its finances.
Debenhams has since denied it had misled the market.
In February, the embattled department store secured a short-term cash injection of £40 million after lenders agreed to extend its overdraft limit as it sought refinancing to secure its future.
The current negotiations for a further £150 million comprises of £40 million that would be used to refinance the £40 million cash injection it received.
Debenhams currently has £520 million in debt facilities, including £320 million of loans and £200 million of bonds which are due to be repaid next year.
In January, it said it had a net debt of £286 million.
Click here to sign up to Retail Gazette‘s free daily email newsletter
