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Silver - MA won't be spending any money here re legal challenge......to find out many lending covenants were breached. Such covenants would have included additional restrictions on other lending /funding. The BOD will outline this if there was a challenge.... we had no option your honour... only thing to do here is accept a full write off on your gamble
As Noel Edmonds vs HBOS showns, these things often take a very long time to resolve. MA has more legal resources to call on so hopefully a result will not take so long.
Unfortunately there will be no return here ever for shareholders. Anything else is misleading. Lenders were calling the shots here, it seems Debenhams entered administration however I'm sure if they didn't lenders would have put them into it! The lenders protected their position which they are entitled to do. I'm sure they felt their return would be greater rather than - lump sum from a sale rather than restructure a deal with MA. Why was MA so interested in Debs - to save jobs?? Come on! If a company has half a bill in debt and pension liabilities and can't pay the debt, what happens? MA is a business man, the lenders decided to take their best loss which in their view wasn't working with MA. Its business folks. Stop gambling on shares. This was a pure gamble given company issues
Knigelk, read those articles from CityAM. The first one which I had to split into two parts makes pretty good reading, but the link posted by Silverspoons is eye opening. I reckon the Supreme Court will vote in our favour which opens the floodgates fairly royally.
I think a lot of us were staggered at the ease and speed with which it was possible to put DEB into administration by the debtors. That situation looks like it may soon unravel.
Pearls - I'm no expert - I don't deal in companies going through administration or thankfully invest in many companies that end up in administration (one or two over the years) .. but surely the CVAs voted though yesterday will mean the company coming out of administration? (even if this is at a later date). With the CVAs voted though you have to question the D4E shareholder wipeout - a listing as an asset in itself - I still believe getting MA out of the picture was the key aim here - as the debt is still there !!
Meta, I take your point, but what in fact happened is that they were transferred, not sold. What was the consideration for the sale? Exactly.
The company moved into administration, and despite supposedly being 'sold' remains in administration. Well, that is a funny sort of administration then. A buyer would buy it out of administration and then it would no longer be in administration. This has not happened here. It is a transferral currently. If they had sold it in the recently attempted sale, then that would have been different. I thoroughly agree that in that case shareholders would have been wiped out if the sale price did not exceed the debts. From what I read, only low ball offers were made, all of which were unacceptable to no deal.
That means DEB remains in administration, and debtors and creditors, and in fact shareholders are still protected by this process. There remains the outside chance of some return to shareholders if administrators now manage to run things well and make DEB into a lean fighting machine again. And as was pointed out by another poster, there is also now the chance of the Supreme Court taking action in our favour.
Your city broker friend should not give you false hope.
You claim:
" whilst it remains in administration, and whilst the administrators fail to sell it, so it remains possible that in the event of a turnaround in fortunes, and cutting of the debt, that if the administrators can, at a later stage then manage to sell it for an amount exceeding the debt, that shareholders would still get some payout."
Even if that were the case, you would get nothing.
Because:
"Immediately following our appointment, we sold the Company's shares in Debenhams Group Holdings Limited, as well as certain other active and dormant entities, together constituting the Company's entire interest in the Debenhams group companies ("the Group") to Celine UK Newco I Limited ("Newco"), an entity owned by certain of the Company's secured lenders"
A friend of mine who is a city broker advised that what a lot of folk don't understand here is that the administration actually protects various parties including allowing DEB to continue trading. The administrators have taken on all the assets of the company as well as its debts. These various parties have a ranking and as we know, shareholders rank below debt holders. The shares are part of the assets, and include those previously held in house as Treasury. In administration these may appear to have a nominally worthless value, but they are part of the overall assets and debt controlled by administrators. However, whilst it remains in administration, and whilst the administrators fail to sell it, so it remains possible that in the event of a turnaround in fortunes, and cutting of the debt, that if the administrators can, at a later stage then manage to sell it for an amount exceeding the debt, that shareholders would still get some payout.
I cannot see the vulture funds deliberately selling out at current offer levels, indeed they have not. They will run this for a while, injecting funds where necessary and keep the operation viable. In due course, it may turn round. I would imagine that in that circumstance, administrators may feel the best course of action is to then relist the stock.
This happened before with both Mothercare and Carpetright to name two well known high street examples. Yes, sharheolders will only have a diluted part of that new listing, but it is better than nothing, and in reality the new leaner, lower indebted operation should be more attractive to shareholders.
Still, looking at current developments, the Supreme Court's ruling on these sorts of matters may happen first in which case I would say a general lawsuit led by MA against the administrators may be more lucrative.
Clearly there are a range of things going on behind the scenes now. Time to await developments.
This is certainly a very positive development. As CityAM pointed out in yesterday's article, the DEB BOD acted clearly against shareholders by moving swiftly to do everything to block / avoid the EGM called by MA. Shareholders have been treated disgracefully in this instance, and I contend the BOD actually WILLINGLY took on extra debt to make its position with debtors stronger than with creditors. A deliberate loading up of debt took place here in a desperate attempt to hold MA at bay and stop him sacking the BOD. As a result, the BOD failed to act in shareholders interests.
"The cases presented during these debates suggest that the insolvency system was used as a tool by financial institutions to eradicate troublesome complaints as the rights of the business owner and shareholders were removed and the avenues for redress and justice were blocked," the APPG said.
One email sent by a GRG manager to a colleague, and cited by the APPG, reads: "Hopefully this case will move into the insolvency process in the next two weeks and we can then close it off."
Ned Beale, a partner at law firm Trowers & Hamlins that is acting for the APPG, told City A.M: "If the Supreme Court relaxes the rule against reflective loss it will get rid of a difficult hurdle business owners can face in an insolvent situation. It will make self-help through litigation a more realistic option."
Kevin Hollinrake MP, co-chair of the APPG, said: “The mechanisms in place for the directors and shareholders of insolvent businesses to obtain redress and receive compensation for creditor misconduct are unsatisfactory. We hope to establish that the rule against reflective loss must not restrict the rights of these individuals to bring a claim, and must not restrict them from accessing justice when their business has been taken from them through the misconduct of their bank."
From BBC:
Debenhams' creditors have backed a turnaround plan that will see the closure of 50 stores and rent reductions for others.
Landlords and others voted with a majority "significantly above" the required threshold of 75% on each of the board's proposals.
Debenhams' executive chairman Terry Duddy said: "I am grateful to our suppliers, our pension stakeholders and our landlords who have overwhelmingly backed our store restructuring plans.
"We will continue to work to preserve as many stores and jobs as possible through this process. This is a further important step to give us the platform to deliver a turnaround."
The turnaround plan involves a store closure programme under a process known as a Company Voluntary Arrangement (CVA), which also allows for rents to be renegotiated at stores that remain open.
The chain has already named 22 stores which will start closing next year, including those in Canterbury, Wolverhampton and Kirkcaldy.
Of the stores which stay open, 39 will stick to their current rental rates for the duration of their leases.
For the other stores, the company is aiming to secure rental reductions of between 25% and 50%.
When it comes to the city, the stock market is not just a part of the puzzle, it is the most essential part of the puzzle. Without it, only private companies can exist. Now the message being sent out here is that shareholders rights are worthless. MA had a 30% holding, yet he was powerless to stop a renegade board from driving the company into the hands of debt vulchures.
Other investers with big pockets will have taken note of this and will be watching with interest to see how little protection their majority holdings have, and calculating if they should start selling or put on hold any remotely risky investment strategies. Once disinvested these guys will put there money elsewhere, in safer juristictions like Germany or Singapore. They may very well leave London forever.
In summary, the FCA has no choice. As a minimum it has to start investigating soon. It needs to show these investors it will not tolerate any form of dereliction of duty by board members, and it needs to send out a loud and clear message that shareholders in the London stock market can rely upon it to uphold their rights.
The company was stolen. There is no doubt about that. The fake sales process is a sham. The conditions attached to it are there to make sure nobody will buy, so that the thieves can keep Debenhams themselves, and justify the theft by saying that there were no buyers. It was an inside job executed with the help of corrupt directors.
Looks to me like there's a change in the air on this. Could not have put matters better myself, and fully agree with CityAM's comments.
Offers are now being sought for the operations, but on tough terms that stop a buyer contacting landlords or concessionaires for 18 months – a ridiculous restriction, not least since Debenhams is now in a Company Voluntary Arrangement with creditors to reorganise its debt stack.
Does this restriction apply to the lenders and current owners? No wonder Sports Direct has complained to the FCA that this potential sale is not genuine. The Americans have ridden roughshod over UK insolvency law while regulators sit and watch.
Directors would insist that they have acted in good faith, putting the interests of the company – and therefore its shareholders – first. However, the Companies Act 2006 is clear on fiduciary duties to shareholders as a whole, as well as on exercising powers to reduce the influence of dissenting ones.
Something is up with the Debenhams process, with the scale of possible wrongs ranging from simple lack of judgement by directors, to what Ashley has described as a “long planned theft”.
Swooping magpies are a protected species unless they are shown to be a threat to conservation. What Debenhams’ directors have conserved is debatable – certainly not Ashley’s 29.7 per cent stake, at an estimated loss of £150m, nor the chance, through his rights issue, for other shareholders to participate in a turnaround.
Regulators have a duty to take a much closer look at what appears an appalling use of the pre-pack process.
Magpies are among the world’s cleverest animals. Prone to cunning theft from other nests, they enjoy a surprising degree of protection.
Foiled Debenhams suitor Mike Ashley won’t miss the irony that while his Newcastle United Football Club is nicknamed after these swooping robbers, a marauding band of debtholders have led a planned effort to steal the stricken retailer from under his nose, wiping out his near 30 per cent stake and those of other shareholders.
The situation is far from black and white. Controversial Sports Direct owner Ashley might be “Marmite”, but the pre-pack administration of Debenhams raises important questions of directors’ obligations to shareholders.
No cheers for the non-executive directors here. Former chairman Sir Ian Cheshire was off the board comfortably before the pre-pack, ousted in January’s AGM. Debenhams had lost 90 per cent of its market value on his watch over less than three years.
The wisdom (and freedom) of remaining directors in appointing administrators is questionable.
Ashley’s long-running battle with Cheshire about underperformance is well-documented. During this period, Sports Direct grew its shareholding to just below the mandatory takeover level. But at some point, the board cemented its determination to keep Ashley’s tanks as far from their lawn as possible, whatever the cost.
In December 2018, Sports Direct’s offer of a £40m interest-free loan, in return for security over some of Debenhams’ assets, was rejected as against the interests of other stakeholders – although the move was seen off by directors in a manner that suggested they were preserving their own positions, as opposed to those of the company.
In football speak, Ashley said it was like being offered Messi on loan and turning him down.
Two months later, the board agreed a loan of £40m from existing lenders, on stringent terms, notably that any fresh debt would require the lenders’ consent. The directors effectively shut Ashley out from that point.
While directors were planning in March to raise £200m from these lenders, Ashley offered £150m interest-free, on the condition that he became chief executive and the new debt plan was dropped. Later in the month, he considered a £61m cash offer for Debenhams’ equity – double the market value. Finally, in the 24 hours ahead of the group falling into administration, he offered to underwrite a rescue rights issue for £200m.
The company had effectively been working against a timetable imposed by an Emergency General Meeting process. Debenhams had to respond within 21 days and hold the meeting within a further 28 days, meaning a late-April deadline.
The pre-pack deal agreed by directors immediately sold the shares in the trading entity to a new vehicle controlled by US debt investors.
Reported on Sky:
Stefaan Vansteenkiste, Celine's chief risk officer, said: "The investor consortium is a committed long-term owner, which has provided Debenhams with £200m in fresh funding for the financial restructuring process and to fund the company's operating turnaround.
"Within the consortium, there is extensive turnaround experience, which we will deploy to support the management's plan and to position Debenhams for a long-term successful future."
Pearls - to name a few - the MTV - WRN - CTAG threads are still on LSE years (!!) after suspension - delisting. Just type in the ticker and the company appears - and all these threads are still (!!) active. LSE really should have a time limit for threads imho - perhaps three years - otherwise you will get posters still expecting a recovery-relisting-RTO when it is so rare an event. MA has gone quiet - all mouth and no trousers...
Morning Pearls
Whilst there is discussion to be had then yes it is welcome that this page has not been shut down.
"Could one of you clarify something for me?
If Celine can't sell on the company to anyone, then am I right in believing this theoretically could be positive for us ex shareholders as Celine et co will then be forced to carry on trading the company through the administration, and in the unlikely event they pull off a turnround in DEB's fortunes, and are then able to sell it for a reasonable amount higher than the debts, shareholders would then at last receive some sort of payout?"
No
Got to admit that MA has hardly covered himself in glory over this. And as you say, he has not even made an offer to the administrators.
Perhaps if he is pursuing legal action he is then unable to make an offer? Given his rather prominent role in things, he is surprisingly quiet now.
Daniel / Meta, good morning .
I have to admit that even you must admit it is good that lse keeps these discussion boards going even after a company goes into administration.
Could one of you clarify something for me?
If Celine can't sell on the company to anyone, then am I right in believing this theoretically could be positive for us ex shareholders as Celine et co will then be forced to carry on trading the company through the administration, and in the unlikely event they pull off a turnround in DEB's fortunes, and are then able to sell it for a reasonable amount higher than the debts, shareholders would then at last receive some sort of payout?
From the Independent: Debenhams is also pushing for councils to slash its business rates bills by half.
John Webber Head of business rates at proprty firm Colliers International said: “It is akin to going with a begging bowl to the person who has just robbed you – asking Local Authorities to grant business rates reductions – and these reductions if granted are only likely to last for a year and as they are discretionary relief could easily fall foul of State Aid limits."
“What is ridiculous is that a 50 per cent plus business rates tax is part of the reason that Debenhams is going through a CVA. So, in effect they are asking for mercy from the perpetrator of their desperate state."
I guess his bid is never going to be high enough, just audacious like all the possible offers and proposals before all this. No doubt SPD will cry foul. But its not their business to sell.
The administrators were very clear that as part of this subsequent sale process, anyone could bid and if bids came in at acceptable levels, value could theoretically flow back to existing shareholders.
What makes you think MA couldn't bid in this process? If his bid came in high enough to cash them out at a great return, I find it hard arguing that they wouldn't accept.