Written by: Keith Tully
Published: 13th February 2019
The department store operator Debenhams has secured access to a £40 million credit facility that should help it cope with the pressures of its ongoing funding crisis.
The retailer is in the process of attempting to agree long-term deals with its lenders after having been forced to issue three profit warnings last year and recently posting full-year losses worth close to £500 million.
Plans are already in place for the company to close down 50 stores in the UK over the course of the next five years but efforts to accelerate some store closures are now being stepped up as the retailer battles to remain financially viable.
Debenhams’ chief executive Sergio Bucher has called the securing of access to the £50 million credit facility as being a “first step” in a wider refinancing process that remains ongoing.
“The support of our lenders for our turnaround plan is important to underpin a comprehensive solution that will take account of the interests of all stakeholders and deliver a sustainable and profitable future,” he said in a statement.
“This debt agreement is a lifeline for Debenhams, but isn’t going to solve its fundamental problems,” said Laith Khalaf from the investment advisors at Hargreaves Lansdown of the recently agreed credit deal.
“Trading conditions remain extremely challenging and the business has a tightrope to walk between cutting costs and investing in improvements,” he said.
Speaking after his company posted losses worth £491.5 million for the full year 2017/18, Sergio Bucher, Debenhams’ CEO, said: “It has been a tough year for retail in 2018 and our performance reflects that.
“We are taking decisive steps to strengthen Debenhams in a market that remains volatile and challenging.”
House of Fraser, a key high street rival for Debenhams, fell into administration in August of last year but was immediately acquired by Sport Direct in a deal worth £90 million.
Prior to its collapse, House of Fraser had 59 stores across the UK and in the region of 11,000 employees.
Debenhams currently has 165 stores nationwide and a workforce numbering a total of around 25,000 people.