Debenhams in administration; operating companies to continue as normal

By Caroline Salls

Pittsburgh, April 9 – Debenhams plc has entered administration, according to a notice released Tuesday.

Chad Griffin, Simon Kirkhope and Andrew Johnson of FTI Consulting LLP were appointed as joint administrators by the company’s secured lenders.

Debenhams said the group’s operating companies continue to trade as normal and honor their obligations, meaning commercial stakeholders should not be adversely impacted by the administration.

Immediately following their appointment, the joint administrators sold the company’s shares in the group to Celine UK Newco I Ltd., an entity owned some of Debenhams’ secured lenders.

Celine UK Newco I acceded to the trust deed governing the company’s 5¼% notes due 2021 as an additional subsidiary guarantor.

Debenhams said this transaction allows additional funding of up to £99 million.

According to the notice, the group will continue to implement the restructuring of its operations, including optimizing its store portfolio to improve trading performance and deleverage the business.

The group said it 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 its rent burden and underpin a sustainable future.

Debenhams said this is a critical component of the group’s restructuring plan, and executing this is in part linked to the provision of £200 million in facilities and lenders implementing a £100 million debt-for-equity swap.

Trading in Debenhams’ shares was suspended Tuesday morning and will be cancelled as of April 10.

In addition, the company’s level one sponsored American Depositary Receipt program will be terminated following the cancellation of the listing.

Debenhams said a shareholders’ meeting requisitioned before the administration for the purpose of the removal of all of the company’s directions except for Rachel Osborne and the appointment of Michael Ashley as chief executive officer will not be held.

“It is disappointing to reach a conclusion that will result in no value for our equityholders,” Debenhams chairman Terry Duddy said in the notice.

“However, this transaction will allow Debenhams to continue trading as normal; access the funding we need; and proceed with executing our turnaround plans, whilst deleveraging the group’s balance sheet.

“We remain focused on protecting as many stores and jobs as possible, consistent with establishing a sustainable store portfolio in line with our previous guidance.”

In a separate release, Debenhams confirmed that the relevant milestones related to a potential transaction with Sports Direct International plc, which would have made available a second tranche of new facilities, were not met.

The company said it is in discussions with its lenders regarding the availability of the remaining facilities that have not yet been drawn down, but it is likely that these facilities will now only be available to the group’s subsidiaries upon transfer of those subsidiaries into the ownership of a lender-approved entity.

Debenhams’ board said it received a revised, highly conditional, proposal from Sports Direct in the early hours of April 9 that indicated a willingness of Sports Direct to underwrite an equity issue of £200 million.

However, the company said its lenders confirmed that the proposal was not sufficient to justify an extension of the relevant deadlines.

Debenhams is a London-based department store chain.

© 2015 Prospect News.
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