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Debenhams buys time with £40m lifeline

Published on: February 12th, 2019

The firm also announced a new sourcing partnership with Hong Kong-based supply chain manager Li & Fung, co-owner of Toys R Us Asia.

The department store chain has been battling to reach a deal with lenders after challenging Christmas trading ended a lacklustre 2018, during which time Debenhams issued three profit warnings.

CEO Sergio Bucher described the development as a “first step in our refinancing process”, adding: “The support of our lenders for our turnaround plan is important to underpin a comprehensive solution that will take account of the interests of all stakeholders, and deliver a sustainable and profitable future for Debenhams.”

Debenhams said it would continue talking to its lenders about a comprehensive refinancing. The rescue process is expected to involve store closures and lenders taking a stake in the company.

The firm also announced a new sourcing partnership with Hong Kong-based supply chain manager Li & Fung. This will give Debenhams access to state-of-the-art technology in the LF digital platform, enabling it to respond more quickly to trends and customers’ preferences.

Without the short-term overdraft extension, Debenhams risked breaching the terms on its debt when it faces a test on its financial health at the end of February. Cashflow has been squeezed as suppliers concerned about the financial health of the company are demanding more up-front payments.

The retailer has been exploring the closure of as many as 50 stores via a CVA. CVAs can take several weeks to arrange and it is not clear if a deal can be put in place before Debenhams’ quarterly rent day in late March, when it will have to pay out about £50m to landlords.

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