// Administrators appointed to Debenhams to successfully sell the business
// Control of department store handed over to lenders as part of pre-pack administration process
// Shareholders such as Mike Ashley have lost their equity in the deal
// Store closures and job cuts expected, but affected stores not yet revealed
Debenhams has fallen under the control of its lenders after administrators were appointed to handle the successful sale of the business.
The department store this morning appointed joint administrators from FTI Consulting, who immediately sold the retailer to a newly incorporated company controlled by secured lenders in a pre-pack administration deal.
The new ownership means Debenhams will now have available to it significant additional funding in line with the £200 million new money facilities it had announced on March 29.
The 240-year-old retailer added that its shares have been suspended since this morning and will be cancelled with effect from April 10.
The pre-pack deal effectively means all of Debenhams’ previous shareholders – including Mike Ashley’s Sports Direct, which had a near-30 per cent stake in the department store – will now lose their equity.
The department store stressed that despite the administration, all 165 of its stores will operate as per usual and that its commercial relationships with suppliers, employees and pension holders remain unaffected.
However, in its full year report late last year – whereby it revealed a historic statutory loss of £491.5 million – Debenhams revealed plans to close around 50 under-performing stores in the next three to five years.
The news comes after a headline-grabbing war of words between Debenhams’ board and Ashley, with the former rejecting several rescue offers and takeover attempts from Sports Direct in the last few weeks.
Hours before it announced its administration, Ashley made a desperate last-minute rescue bid in the form of underwriting a £200 million rights issue which would see investors buying newly issued shares.
It was also an advance on a £150 million plan that was tabled and rejected yesterday.
However, lenders to Debenhams said Ashley’s latest proposal this morning, on the terms set out, was “not sufficient”.
The secured lenders that have now taken control of Debenhams are a mix of banks and US hedge funds, such as Barclays, Bank of Ireland, Silver Point and GoldenTree.
Debenhams currently employs an estimate of 25,000 people.
A full list of shops which it may shut down has not been revealed yet, but the retailer has reportedly been renegotiating rents with landlords and there is speculation a CVA could be launched later down the track to fast-track the planned 50 store closures.
Last month, Debenhams secured a £200 million refinancing plan that provided it with facilities of £101 million and £99 million.
The first facility of £101 million was drawn down immediately, but the second facility could only be accessed “upon transfer of those subsidiaries into the ownership of a lender-approved entity”.
Debenhams had given Sports Direct a deadline of April 8 to either walk away or make a firm takeover offer that included arrangements to refinance its debt, or commit to either providing funding for the business or underwriting the issue of new shares.
Because a deal was not agreed by the deadline, a pre-pack administration was pursued – a process that allows a company to sell itself, or its assets, as a going concern, without affecting the operation of the business.