Written by: Keith Tully
Reviewed: Tuesday 9th April, 2019
The group that owns the department store chain Debenhams has been taken over by its creditors after its board rejected a last-ditch rescue bid from one of its main shareholders.
Mike Ashley, the owner of Sport Direct, which had owned 29 per cent of Debenhams shares, offered to underwrite a £200 million equity issue early on the morning of April 9th.
However, this bid, which might’ve brought some much-needed financial flexibility to the retailer, was conditional on Mr Ashley being installed as the company’s chief executive.
Having rejected Mr Ashley’s offer, the company’s board proceeded to appoint administrators to carry out a pre-agreed insolvency and sale process, with its shares having already ceased to be traded earlier in the day.
Debenhams’ entry into administration puts the future for its dozens of stores across the UK in doubt and seemingly puts the prospects for its tens of thousands of employees in a degree of jeopardy.
Statements now appearing on the Debenhams website make clear that only the group’s main holding company has entered administration with its various operating companies remaining able to “continue to trade as normal”.
The entry into administration saw shares in Debenhams’ holding company sold to a newly formed group called Celine Newco I Limited, which is owned by company creditors.
Further statements given said: “The transaction delivers continuity for all group operations. It minimises business disruption, ensures continuity for the businesses and their suppliers and protects the group’s employees. It also allows additional funding of up to £99 million to be provided.”
The pre-pack administration deal that has seen Debenhams sold very swiftly to its new owners means that formerly very significant shareholders, including Mr Ashley from Sports Direct, have effectively had their holdings wiped out.
Mr Ashley had steadily accumulated his 29 per cent share holding in Debenhams at a cost of around £150 million.
Debenhams’ financial performance in recent quarters has been notably poor, with the retailer posting a full-year pre-tax loss worth some £491.5 million towards the end of last year and issuing three profit warnings over the course of 2018.
There are currently in the region of 25,000 people employed by Debenhams and it has 165 outlets in operation.