Debenhams lenders appoint advisers ahead of restructuring

Published on: January 10th, 2019

Syndicate of lenders including prominent hedge funds appoints FTI Consulting to advise on their interest Debenhams.

FTI’s appointment is understood to have been signed off just days before Christmas, with Debenhams hoping to defy expectations of a dire festive trading period for the wider non-food retail sector.

The move will come as Debenhams prepares to solidify the details of a wide-ranging restructuring plan that will involve closing dozens of stores, axing thousands of jobs and seeking an agreement with banks and other creditors.

In results released this morning, Debenhams reported a 5.7% fall in like-for-like sales in the 18 weeks to 5th January. In the shorter trading period, the six weeks to 5th January, like-for-like sales – which strip out changes to stores – were down 3.4%.

Mike Ashley’s Sports Direct owns nearly 30% of Debenhams and has offered a £40m investment in the chain. Debenhams rebuffed his approach but is talking to lenders about renewing £520m of banking facilities. In the meantime, it will postpone the possible sale of other parts of its business, including its successful operations in Denmark. Online sales rose 6% in the six-week Christmas trading period, after what Debenhams described as “slow start to the season”. It said this meant there had been two-year online growth of over 20%.

The company has total borrowing facilities of just over £500m. Its mainstream lenders include Royal Bank of Scotland, while hedge funds including Alcentra and Silver Point – which played a big role in the restructuring of the Co-op Bank in 2017 – have also bought into its debt in the last few months.

The company said last autumn that it was taking “decisive action” to secure its future through an accelerated programme of cost savings. The principal measure was a plan to extend its previously announced store closure programme from 10 to a possible 50 sites over the next three to five years. Discussions with landlords are now underway, and more than 4,000 of the company’s 27,000-strong workforce are likely to be lost as a consequence of the closure proposals.

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