Debenhams completes £200m funding round to blow Ashley bid out of the water
Debenhams completed its £200m refinancing deal this morning, defeating a takeover bid by Sports Direct billionaire Mike Ashley.
Read more: Debenhams bondholders back £200m rescue loan in blow to Ashley bid
The announcement sent shares up almost 30 per cent as the embattled retailer said shareholders remain in its plans.
The move means the department store chain could now fall into the hands of lenders including Barclays, and the firm had warned securing the loan could wipe out shareholders’ equity.
But Debenhams said today it has “preserved a route” for shareholders, causing shares to lift from a nine per cent drop to stand 29 per cent up at 2.7p.
“We are pleased to have agreed this comprehensive funding package which secures the future of the Debenhams business and provides reassurance for Debenhams' employees, pension holders, suppliers, lenders and other stakeholders,” Debenhams chairman Terry Duddy said.
He added that it “has preserved a route for our shareholders to participate in the future of the business, but this requires the support of our major shareholder”, in a pointed address to Ashley.
“We will now move to the next phase of the restructuring of the business, which includes reducing rents and reshaping our store portfolio, as we have referenced in previous announcements,” Duddy finished.
“These actions are necessary to ensure the strongest possible platform to support the business going forward.”
Morning Wire has approached Sports Direct for comment.
This morning Ashley lashed out at Debenhams in a remarkable move, saying “if there were any justice in the world the majority of the advisors would be put in prison”.
He had sought to install himself as chief executive at the struggling department store through a £61.4m bid, but never made the 5p per share offer.
Instead Debenhams yesterday secured majority support form bondholders for the £200m loan from existing lenders.
The £200m lifeline will make £101m available for Debenhams to use, according to the BBC.
But the remaining £99m depends on a major shareholder making a firm offer for the retailer, or refinancing Debenhams debt, the BBC reported.
Otherwise Sports Direct could stop its bid to oust the board and Ashley could either underwrite a rights issue or offer funding – but on terms set by Debenhams' lenders.
Sports Direct said it is considering its response.
If those attempts fail the remaining funds would only be available once lenders take control of Debenhams – wiping out shareholders' equity.
Debenhams has previously rejected other Ashley attempts at a power grab, including a £100m offer for Debenhams’ Danish arm Magasin Du Nord, and a £150m loan offer that would have forced out Debenhams boss Sergio Bucher to install Ashley in Bucher’s place.
Yesterday Debenhams surrendered its lease on its London headquarters in Rathbone Place, with Facebook set to take up residence instead.
A spokesman for the Debenhams Pension Schemes said: “We welcome the agreement announced today. Members can be reassured that the schemes will continue to operate as normal.
Read more: DEBATE: Could Mike Ashley be the answer to Debenhams’ woes?
“We hope that the agreement will form the basis of a sustainable solution for the trading business that ensures that it will continue to support the pension schemes on a long-term basis.”
MP Frank Field had asked The Pensions Regulator about its scrutiny of Debenhams' pension schemes as it sought a refinancing deal.
“The trustees have worked with our specialist advisers throughout the discussions, to ensure that members’ interests are taken into account, and we have consulted closely with The Pensions Regulator and the Pension Protection Fund at every stage,” the spokesman added.
“We are in the process of writing to all members with further information, and we will continue to keep them informed.”