Debenhams falls into administration as lenders seize control after rejecting Mike Ashley takeover bid

Debenhams has £720 million of debt
PA
Jacob Jarvis9 April 2019

Debenhams has fallen into administration and the hands of its lenders after it rejected a £200m takeover bid from Mike Ashley.

FTI Consulting has been appointed to carry out the administration process and stores will continue to trade as normal.

The business had been on the brink of falling into administration on Tuesday morning after it asked that its shares were suspended from trading.

Administrators have sold Debenhams to a newly-incorporated company controlled by its lenders, which the business was in £720 million of debt to.

Under new ownership, Debenhams will have access to £200 million in emergency funding.

Administrators have said trading will continue as normal for now
REUTERS

However, despite the administrator's assurances the move is expected to trigger store closures and job losses.

This is expected to be part of a wider restructuring that will see around 50 outlets shut via a Company Voluntary Arrangement.

The widely-anticipated change of ownership means shareholders such as Mike Ashley's Sports Direct, who holds a 30 per cent stake, will see their investments wiped out.

Mike Ashley had attempted a £200 million rescue bid
PA

Terry Duddy, Debenhams chairman, said: "It is disappointing to reach a conclusion that will result in no value for our equity holders.

"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 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. I would like to thank them all for their recent and continuing support."

Prior to this latest development, Sports Direct had attempted to take control of the chain.

It put forward a £200 million rescue bid but this was deemed to be insufficient by lenders.

Following the move, employees have been told the pensions scheme is continuing to operate "as normal".

A spokesman for the Debenhams Pension Schemes said: "Debenhams Retail Limited has been transferred to a newly-incorporated company and continues to trade and operate as normal. Members can therefore be reassured that the schemes are carrying on as usual.

"The trustees have worked with our specialist advisers throughout the process of the company's refinancing and restructuring, to ensure that members' interests are taken into account and we have consulted closely with The Pensions Regulator and the Pension Protection Fund at every stage.

"We are in the process of writing to all members with further information and we will continue to keep them informed."

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