Debenhams gets £200 million in new facilities from existing lenders

By Caroline Salls

Pittsburgh, March 29 – Debenhams plc has put in place £200 million of new-money facilities from its existing lenders, according to a news release.

The facilities include £40 million to replace interim borrowing announced on Feb. 12.

“We are pleased to have agreed this comprehensive funding package, which secures the future of the Debenhams business and provides reassurance for Debenhams’ employees, pension holders, suppliers, lenders and other stakeholders,” chairman Terry Duddy said in Friday’s release.

“We have also preserved a route for our shareholders to participate in the future of the business, but this requires the support of our major shareholder.

“We will now move to the next phase of the restructuring of the business, which includes reducing rents and reshaping our store portfolio, as we have referenced in previous announcements. These actions are necessary to ensure the strongest possible platform to support the business going forward.”

The company said the new facilities are for £101 million and £99 million, respectively, and it has served a draw-down notice for all of the first facility.

Debenhams said pricing of the facilities comprises a backstop and upfront premium totaling 5.6% on the total amount of the facilities, an exit fee of 5% of the total amount of the facilities and a margin of 12%.

Availability of the second facility is subject to the satisfaction of one of a number of milestones being reached by April 8, including Sports Direct International plc or another shareholder holding 25% or more of the company shares entering into an agreement covering either a binding offer for the company that refinances the group debt due and payable on a change of control and provides the group with sufficient working capital, or cancellation of the request to convene an extraordinary general meeting, a stabilization agreement and a commitment by Sports Direct to either underwrite a rights issue by the company or provide funding by way of a subordinated debt instrument.

If these milestones are not satisfied, the second facility would be available to the group’s subsidiaries only upon transfer of those subsidiaries into the ownership of a lender-approved entity, ensuring the stability and continuing trading of the group’s operating subsidiaries. However, Debenhams said this would very likely result in no equity value for current shareholders.

Noteholder consents

Debenhams said the holders of its 5¼% senior notes due 2021 have provided consent to amendments to the notes to enable the facility to be entered into and drawn down.

Following discussions between the company, the trustees of the Debenhams pension schemes and key pensions stakeholders, agreement has been reached with the trustees to provide enhanced support to the pensions schemes, including increased contributions and enhanced security.

Store review

According to the release, the group 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 the group’s rent burden.

“This is a critical component of the group’s restructuring plan, and executing this is in part linked to the provision of the facilities,” the release said.

Sports Direct offer

In addition, the company said a possible offer announced by Sports Direct on March 25 did not provide a solution to the group’s immediate working capital needs, and the board could find no way for the group to continue to trade until such time as the offer, if made and successful, had closed.

If the conditions pertaining to the availability of the first tranche of facility B are not satisfied by April 8, the company said it is likely to utilize restructuring options that would result in the core operating subsidiaries, in particular Debenhams Retail Ltd. and Debenhams Properties Ltd., being transferred into the ownership of a lender‑approved entity.

Debenhams is a London-based department store chain.

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