High Street chain Debenhams has entered administration and has immediately been taken over by its lenders in a move to allow the struggling business to access new money to keep it afloat.
Last night, Mike Ashley’s Sports Direct, who own 30% of the business, made a £200m offer, which was rejected.
Stores will continue to trade as normal for now, but shareholders, including Sports Direct, will be wiped out. Several of the company’s 166 UK stores are facing closure, meaning some of their 25,000 staff could face job losses.
The administration process saw FTI Consulting appointed before immediately selling Debenhams for £101.8m, together with debts worth £520m plus the company’s pension obligations.
The high street chain has been hit by a sharp slowdown in sales, high rents and ballooning debts. Last October it reported an annual loss of £492m and confirmed plans to close up to 50 stores, putting about 4,000 jobs at risk.
Its new owners, including banks and hedge funds led by Silver Point, are expected to carry out a restructuring including a company voluntary arrangement (CVA) to cut back on the group’s rent bill and the closure of loss-making stores after Christmas.
The administration comes after an increasingly acrimonious battle between Ashley and the Debenhams board over the future of the 240-year-old company.
Ashley had made a series of offers to refinance the business – conditional on himself being appointed as chief executive – while calling for the board to be cleared out.
Over the weekend, Sports Direct issued a combative statement accusing the Debenhams board of a “sustained programme of falsehood and denials” and calling for directors to take lie detector tests following a disputed meeting.
All of Mr Ashley’s offers were rejected, including a takeover valuing the business at £61.4m and a plan put forward in the early hours of Tuesday morning for Sports Direct to underwrite a £200m rights issue – a way of raising cash from shareholders.
Debenhams said none of the offers were “deemed deliverable” given conditions attached, timing, and “other stakeholder obligations and considerations”.
Chairman Terry Duddy said it was “disappointing” that existing shareholders would be wiped out by the process.
But he said it wold allow Debenhams to continue trading as normal, access new funding and carry out its turnaround
“In the meantime, our customers, colleagues, pension holders, suppliers and landlords can be reassured that Debenhams will now be able to move forward on a stable footing.”