Debenhams Regulatory News (DEB)

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FOR IMMEDIATE RELEASE

£200m refinancing completed

Debenhams plc (the "company") today confirmed that it has put in place new facilities with its existing lenders. These provide the group with facilities totalling £200m of new money, including £40m to replace the interim borrowing announced on 12 February.

Terry Duddy, Chairman of Debenhams, said:

"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. We have also preserved a route for our shareholders to participate in the future of the business, but this requires the support of our major shareholder.

"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. These actions are necessary to ensure the strongest possible platform to support the business going forward."

The facilities are for £101 million and £99 million and the company has served a draw down notice for all of the first facility today. Availability of the second facility is subject to the satisfaction of one of a number of milestones being reached by 8 April 2019. These milestones include Sports Direct International plc ("Sports Direct") or another shareholder holding 25% or more of the company shares, entering into an agreement with the company and its lenders covering either (i) a firm and binding offer for the company which includes satisfactory arrangements to refinance the group debt that becomes due and payable on a change of control, and provides the group with sufficient working capital; or (ii) cancellation of the request to convene an EGM of the company, a stabilisation agreement with the company and a commitment by Sports Direct to either underwrite a rights issue by the company or provide funding by way of a subordinated debt instrument on terms agreed with the group's lenders and noteholders.

If these milestones are not satisfied, the second facility would be available to the group's subsidiaries only upon transfer of those subsidiaries into the ownership of a lender-approved entity. This outcome would ensure the stability and continuing trading of the group's operating subsidiaries, with no disruption to the group's business, customers, employees, pension holders, suppliers or operations. However, it would very likely result in no equity value for the company's current shareholders.

As announced on 28 March 2019, the holders of the Company's 5.25% Senior Notes due 2021 (the "Notes") have provided consent to the amendments sought to the terms of the Notes to enable the facility to be entered into and drawn down. Following discussions between the company, the trustees of the Debenhams pension schemes and key pensions stakeholders, agreement has been reached with the trustees to provide enhanced support to the pensions schemes, including increased contributions and enhanced security.

The group has undertaken a thorough review of its store estate in the context of the current and future retail environment and plans to proceed with a restructuring of the estate that, if approved, will result in a significant overall reduction in the group's rent burden. This is a critical component of the group's restructuring plan, and executing this is in part linked to the provision of the facilities.

The board of Debenhams has also sought to do its utmost to preserve value and optionality for the company's shareholders. The board has received a number of proposals in recent weeks from Sports Direct that have purported to provide a solution to the group's financial challenges. In the board's judgement, none of these have provided or been compatible with a comprehensive solution.

The possible offer announced by Sports Direct on 25 March 2019 did not provide a solution to the group's immediate working capital needs, and the board could find no way for the group to continue to trade until such time as the offer, if made and successful, had closed. The company therefore had no implementable alternative to its well-developed plans to enter into the facilities in order to protect the interests of its broader group of stakeholders including employees, pension holders, suppliers and lenders. By entering into the facilities there is provision for Sports Direct to participate in a comprehensive solution, and we will be contacting Sports Direct to outline once again the terms on which their constructive participation would be possible if they wish to participate.

-ENDS-

Enquiries:

Analysts and investors

Debenhams PLC Katharine Wynne, Director of Investor Relations

020 3549 6304

Lazard (financial advisor) Marcus Taylor

020 7187 2319

Media

Brunswick Group Tim Danaher/Craig Breheny/Fiona Micallef-Eynaud

020 7404 5959

debenhams@brunswickgroup.com

A copy of this announcement will be made available on Debenhams's website at https://ir.debenhams.com/investor-overview.

Lazard & Co., Limited ("Lazard") is authorised and regulated by the FCA in the United Kingdom. Lazard is acting as financial adviser to Debenhams plc and for no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Debenhams plc for providing the protections afforded to clients of Lazard, nor for providing advice in relation to the matters referred to in this announcement.

Neither Lazard nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard in connection with this matters set out in this announcement, any statement contained herein or otherwise.

Details of the new money facilities

1. The new facilities entered into today comprise the following:

· Facility A for a total aggregate amount of £101,250,000 which has been fully drawn and is available for utilisation subject to certain conditions in order to provide liquidity for general working capital purposes, repay the £40 million bridge facility entered into on 11 February 2019 and for payment of fees in connection with the facilities.

· Facility B (for £98,750,000) which is tranched and subject to conditions which provides phased access to the facilities based on achieving certain milestones which include:

· A firm intention to make an offer for the issued share capital of the company by Sports Direct which is not withdrawn or lapsed with evidence to the satisfaction of the lenders as to the ability of Sports Direct to fully fund the repayment of the group's existing financial debt, which would fall due and payable as a result of a change of control, and evidence that the group's working capital requirements through the offer period can be met; or

· No request to convene an EGM of the company being outstanding without the approval of the majority lenders, any shareholder owning more than 25% of the company having entered into a stabilisation agreement in form and substance satisfactory to the majority lenders and any shareholder owning more than 25% of the company agreeing to underwrite a rights issue for shares in Debenhams plc in an amount of no less than £200m, or having provided no less than £200m in the form of a long term subordinated debt instrument with no cashpay interest; or

· The operating group being owned by a new entity reasonably acceptable to the lenders under the new facilities.

· Further tranches of the facility are available dependent upon the timing and implementation of the group's operational restructuring strategy with respect to its store estate as referred to in its previous announcement of 5 March 2019.

2. The pricing of the facilities is in line with market pricing for facilities of this nature and by reference to the prevailing market conditions affecting the group. The pricing comprises a backstop and upfront premium totalling 5.6% on the total amount of the facilities, pro rata to each backstop provider and lender, as relevant, an exit fee of 5% of the total amount of the facilities, pro rata to each lender payable on the repayment or prepayment of the facilities, margin of 12% per annum.

3. In the event that the conditions pertaining to the availability of the first tranche of Facility B are not satisfied by 8 April 2019 the company is likely to utilise restructuring options which would result in the core operating subsidiaries of the company (and in particular Debenhams Retail Limited and Debenhams Properties Limited) being transferred into the ownership of a lender‑approved entity. The company confirms that in these circumstances Debenhams Retail Limited and Debenhams Properties Limited, together with the other operating subsidiaries of the group, would continue to have access to the facilities with no disruption to Debenhams' business, customers, suppliers or operations.

4. It is a condition of the entering into of the facilities that its existing RCF and note indebtedness are secured. In this respect, the company has entered into an agreement with the trustees of the group's pension schemes pursuant to which the company and the trustees have agreed, among other things, that a proportion of the group's pension liabilities will be secured and a revised schedule of pension contributions will be entered into.

5. The current RCF lenders have extended their facilities to a date currently no earlier than 30 June 2021; amended existing terms to facilitate the new money facility being put in place; and entered into a new financial covenant package consistent with a facility of this type. Lenders have received a consent fee of 1.21% in consideration of the above.

6. As part of the next phase of the restructuring, the group will be seeking to reduce its operational and financial leverage to address the group's balance sheet. Any such transaction would require a further consent solicitation and or scheme of arrangement with Noteholders and RCF lenders.