Debenhams seeks cash to cut £1bn debt mountain

The crisis on Britain's High Streets deepened today as it emerged that department stores group Debenhams is looking to raise cash and that the biggest studio photography business has collapsed.

Debenhams' board is expected to discuss plans to raise fresh funds at its next meeting this month in a desperate effort to reduce its almost £1 billion debt mountain as trading conditions become increasingly tough for Britain's stores.

Rumours have circulated for months that Debenhams, which kicks off the January reporting season for big-name chains next Tuesday, is in danger of breaching its banking covenants, claims that the group has vehemently denied. The FTSE 250-listed company is not expected to breach covenants on its debts for at least another six months.

Debenhams declined to comment on the story, but analysts said that cutting its debts would be a sensible move given the grim outlook for the retail sector. Today its shares, which have lost more than 87% since floating in 2006, marked time at 25½p.

It has also emerged that Olan Mills Photography, a 34-store chain that specialises in family portraits, ceased trading on Boxing Day.

Customers were encouraged to pay in advance, meaning thousands of families may not receive prepaid Christmas presents. Olan Mills said it is trying to meet all outstanding orders, and an administrator will be appointed soon.