Pre Pack Administration9 Apr 2019 14:32
Sad day for us punters:
Jonathan Eley in London an hour ago
Print this page
Debenhams has gone into administration and its lenders have taken control, after the struggling department store chain rejected an eleventh-hour offer of financial support from Sports Direct.
The group announced on Tuesday that it had appointed FTI Consulting as administrators and immediately sold its operating subsidiaries to a new company controlled by its lenders.
The shares, which had been suspended earlier in the day, will be cancelled with effect from April 10, but other stakeholders such as staff, suppliers, landlords and pension scheme members will be unaffected, Debenhams said, because the subsidiaries would continue to trade.
The group would continue to restructure, it said, including “optimising” its store portfolio to improve trading and reduce debt and lease obligations. There will also be a £100m debt-for-equity swap.
Debenhams chairman, Terry Duddy, said it was “disappointing to reach a conclusion that will result in no value for our equity holders”.
But he added that the “pre-pack” administration — with a buyer lined up in advance — “will allow Debenhams to continue trading as normal, access the funding we need and proceed with executing our turnround plans”.
In a separate letter to the holders of its unsecured bonds, the group said the operating companies were sold to Celine UK Newco 1 Ltd, which was incorporated on March 22 and is controlled by Silver Point Capital, a US hedge fund.
The outcome is likely to infuriate executives at Sports Direct, a 29 per cent shareholder in Debenhams that will now see the value of its £150m investment wiped out. The company had submitted what Debenhams described as “a highly conditional proposal” late on Monday night, but its lenders concluded that the offer “was not sufficient” to justify an extension to their deadline of April 8 for Sports Direct to submit a bid or underwrite a share issue.
Sports Direct said on Tuesday its proposal included increasing the amount it was prepared to underwrite in a share issue to £200m and reducing the proposed amount to be written off by lenders to £82m, from an earlier £148m.
Like all its previous proposals, the revised offer was conditional on Sports Direct founder Mike Ashley being appointed chief executive — a move that the Debenhams board and its lenders have repeatedly rejected.
However, it has failed to win over the company’s creditors, including various special-situations investors who bought into the distressed debt this year and in effect controlled the agenda.
Debenhams troubles stem partly from a period of private equity ownership at the start of the millennium, when CVC, Merrill Lynch and TPG sold off freehold property, added debts and paid themselves large dividends.
Although the debt fell after the company refloated in 2006, it held back capital investment. Debenhams was also slow to react to changes in shopping habits. It e
Sign In
Follow the stocks
