The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
Debenhams Plc, the 241-year-old UK department-store chain that anchors many of the country’s troubled shopping streets, was taken over by lenders after rebuffing a last-minute offer from billionaire Mike Ashley.
The retailer entered a form of UK insolvency proceedings that allowed US hedge funds and other lenders to take control. Stores employing about 26,000 people will continue to operate as normal, but shareholders’ stakes are now worthless.
The so-called prepackaged administration culminates a months-long battle between Ashley, whose Sports Direct International Plc owned about 30 percent of Debenhams, and lenders seeking to protect their investments via a $940 million debt restructuring. The two sides failed to come to an accord even after Ashley improved a last-ditch proposal to salvage his stake.
Administrator FTI Consulting will seek a sale of the company immediately, which could give Ashley a new opportunity to bid. Proceeds will be used to fully repay debt and it’s unlikely there will be any cash left over to go to shareholders, Debenhams said.
“It is disappointing to reach a conclusion that will result in no value for our equity holders,†Debenhams Chairman Terry Duddy said. “However, this transaction will allow Debenhams to continue trading as normal, access the funding we need, and proceed with executing our turnaround plans.â€
Debenhams was already planning to close 50 of its 241 stores and seek rent reductions to tackle the effects of a wider crisis in UK retail that’s claimed household names from department-store owner BHS to the British arm of Toys ‘R’ Us Inc.
The department-store operator has struggled to develop its online business as consumers shift purchases to Amazon.com and other e-commerce providers, with Brexit-related jitters hitting spending.
Debenhams’ secured lenders have been in the driving seat in negotiations since extending a lifeline in February. The company gave Ashley an ultimatum last month to commit to a restructuring on creditors’ terms or risk completely losing his investment. The lenders withheld 99 million pounds of funding until they gained control.
The creditor group has included Barclays Plc and Bank of Ireland Group Plc, along with hedge funds Alcentra and Silver Point Capital.
Debenhams previously rebuffed other Ashley proposals, including offers to extend loans.