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That's right. HOF was a private company that was passed on to creditors after administration, and he bought it from the creditors. It's controlled by the BOD and the shareholders, no one person has control.
Debenhams is a public company. If the situation requires immediate refinancing that requires dilution, the shareholders will be asked to contribute first. If they reject there will probably be a deal with the creditors for dept to equity swap, again to be approved by shareholders, and also probably allowing shareholders who wish to refinance to do so.
Debenhams will emerge out of this situation dept free but with current Shareholders either diluted or required to pay for refinance. In any case MA will still have to do a formal takeover bid to acquire it.
If MA really wants Debenhams now is the best time for him, he won't find a situation as dire as Brexit + devaluated share, so the reply he got from Chesire is the appropriate one. Either bid or shut up.
https://uk.reuters.com/article/us-sports-direct-debenhams/sports-direct-rules-out-debenhams-bid-after-shares-rise-on-director-comments-idUKKCN1LS1NG
Amid the confusion, after the market closed Sports Direct issued a statement to the London Stock Exchange, saying it did not intend to make an offer for Debenhams. Under UK takeover rules that effectively rules out Sports Direct from making a bid for six months, subject to various caveats.
He probably can citing extreme market conditions or other issues falling under the caveats
Finally someone replies to MA properly.
The truth is that if MA really wants Debenhams, now is the time to acquire it. The share price is at ridiculous levels, panicked shareholders will easily accept a 20p (250m) takeover bid amid fears of Brexit.
If he chooses to wait for administration, he will have to wait for a long time, since the business is viable and easily financed until 2021. In addition the turn around strategy can actually work until then, with dept reduced propelling the share to the 50s.
Debenhams isn't HOF. HOF was loss making for years before administration.
It actually makes a lot of sense to do that now to try to create the Harrods of the high street that he wants. There won't be a better time.
This phrase is passed around way too much. "1% chance of survival" "Stock price is going to 0 after December", "They won't survive brexit". We got 3 major sources of information
-MA who's best interest is to manage to acquire as much of Debenhams as cheap as possible, thus attempting to declare it bankrupt and at the same time offering loan shark offers (Loan in exchange for 10% of shares at a ridiculous price). He's willing to get extra shares without a formal takeover bid that he doesn't even hesitate to drop his own SPD share 15% in a day, forcing his own BOD to issue an RNS clarifying that things are not as bad as he says.
-Articles of little credibility reminding us every couple of days about "the death of high street", never missing a chance to mention Debenham's since it's the stock affected the most, just for a couple of extra views, begging for any company to go under so that they make 5 extra pounds from advertising
-The BOD of Debenhams which are actually 1) Liable for market manipulation and misleading investors 2) Possess the necessary inside information 3) placing their reputation on the line assessing the viability of the business and finding that the business is viable for the next 3 years taking into account pessimistic scenarios and risks.
I think most shareholders prefer to trust the BOD. No one knows if it will survive in the long run, it depends on a lot of factors, but please understand that the share price and debenham's survival are not related. Share price is supply and demand. Debenham's chances of survival where the same at 25p six months ago, 15p 3 months ago as they are now at 5p as it will if it goes sub 5p. Nothing changed, it's the same company.
Annual report page 43:
https://ir.debenhams.com/static-files/32bcca3d-8332-4a15-bfbe-08398fc595f1
"The board is in agreement that Debenhams is a viable business and the viability statement can be found in the directors’ report on page 78 In making this statement the directors have considered the resilience of Debenhams,
taking account of its current position and historical financial performance, the principal risks facing the business in severe but theoretical scenarios, and the effectiveness of any mitigating actions. This assessment has considered the potential impacts of these risks on the business model, future performance,solvency and liquidity over the period. In assessing these impacts, the directors also considered specific supplier risks in relation to credit insurance and the potential impact that working capital may be impacted by such risks. . While recognizing the challenging retail environment will increase the risks and costs around the future refinance of these facilities, based on current market conditions the directors believe Debenhams has the appropriate plans and mitigations in place to maximize the prospects of a successful refinance of these facilities in advance of the 2020 and 202
No I am not into crypto, but when I buy shares of a company hold forever. I usually buy only companies that pay dividends, like Debenhams did 6 motnhs ago, but that's besides the point
The companies you mention weren't profitable. Loss making companies obviously don't survive. Debenhams is not unprofitable (yet), even though it's getting closer.
Share price is relevant to all underlying fundamentals. The reason why sales is important is because is one of the few financial statistics that is difficult to be manipulated. I know this very well, I run companies. Profitability is very easily manipulated to a great extent. Sales is the key statistic that shows the size and growth of a business in the retail space, even ahead of profitability.
I've looked at the financials. I didn't buy because of their financials, they are quite bad. I bought because their restructuring plan is spot on. I would not recommend anyone investing with more than he can afford to lose, in this company, portfolios should be well diversified. On the other hand, if Debenhams turns around it will pay 7-10x next 5 years at current levels, whereas if one invests in to amazon for example we are looking at 1.5x at most next 5 years.
I think Debenhams has identified their issues correctly and they will fix their financials, and I know they will survive at least for a couple of years more.
My biggest concern to be honest is a no deal brexit that can possibly lead to the -5 to 8$ GDP in UK, which is pretty much a strong recession. In that case I don't see them surviving easily.
Their focus in online shopping and their online growth means they will leverage their brand to offer a mixed department store - online model which may reduce their costs by deleveraging the department store part.
I am troubled by the feedback of people who use their online store both on Twitter and other review sites. I really hope they are addressing their issues and user experience for online shopping
Debenhams has been around for 150 years. It's not the first period people are dying.
I believe their restructuring plan. I accept it's currently high risk / high leverage high reward investment, but I don't see them bankrupt even if they won't reach their old glory. They should float at around 500m market cap in the future, because there is one more thing missed in the fundamental analysis that was provided.
Companies that have 2.5 bn in sales don't have 60m market caps even if they are on break even. It's easier to turn things around with massive sales like that, getting to this amount of sales it's what's hard.
Hmm ok I didn't know that, I was using figures from yahoo finance. Thanks
SPD has 3.3 Bn turnover and Debenhams 2.2 Bn
Regardless Debenhams is massively undervalued
They should issue a report thanking MA for valuing the company at 400m or 6x current market cap and that is enough. Next trade report on January.
No. On one hand the world is collapsing and on the other hand he's valuing the company 6x the current market cap. Holders who hold at average price at or below 30p should be happy.
He offered 40m for 10%, so it is 32.6p
And that's the pessimistic scenario where Debenhams doesn't recover and renegotiate leases without a CVA. In the optimistic scenario Debenhams closes 30% of it's stores and renegotiates the leases on the rest when they expire post without even going the CVA route
If he is waiting for administration he will have to wait for years. Debenhams has a lot of dept but at the moment it's sustainable. If it gets to non sustainability in the future they will go the CVA route. If that fails they will go to administration.
He must be willing to wait 3-4 years for it to go bust.
It's a listed company and the bod had to accept his bid, so the bid has to be based on the stock price. It's pointless to bid something that will be rejected 100%
Can you please share the timestamp ? I don't want to hear the whole 3 hr broadcast.
Yeah that makes lots of sense. 5-6 active users in this thread will pitch in buy the whole company :D
Why would a cva eradicate shareholder value? This will happen only if creditors receive shares that dilute the current shareholders, which is unusually for a CVA. I think CVA will be a good thing for shareholders because it will make the company healthier, less risky and stronger in negotiations.
Shareholders will only be eradicated in either administration or liquidation.
Off course your points are valid too, and they are the reason their market cap isn't close to 1bn. However there is a big gap between a billion and 60m.
Sorry that you sold, don't worry you will make it back in another investment. I held, and I will hold forever even though my loss was at 60% (average price 11p)
Depends how one would define "'strong buy"
In Debenham's case it had a low market cap at 65m at 4.7 where:
-It's brand name and logo only where worth 3 times as that
-A far smaller retail competitor was bought for 50% more AFTER it went bankrupt
-IT can sell it's own owned brand for 200m
-Their net profit last year where half the market cap
-Their EBITDA was 3 time the market cap
-It's inventory was 6 times the market cap
-It's accounting equity was 7 times the market cap
-It's sales where 33 times the market cap
-The management in their last report proven that they know the problems and their strategy addresses them (high rents, focusing online first, but work on the shopping experience offline
-Their yearly cash flow is 2.3 times the market cap
Yes there is a risk of CVA or administration sometime in the next 5 years, like with all retailers if they don't adapt fast, but they've proven they have good credit for next two years. Sales must go waaaay down for them to have an issue.
How is that "a company on the brink". They have 330m in dept. They can pay the dept in a couple of years just by being mildly prudent with financials.