Following a £492m loss in 2018 Debenhams is to be taken over by its lenders as the department store falls into administration.
The downfall of the declining business that employs 25,000 people comes after a £200m offer from Sports Direct owner Mike Ashley – who owned nearly 30 per cent of Debenhams – was turned down.
Pre-packaged administration means the department store can now access new funds to make ends meet while most stores continue to trade for the time being, despite 50 branches already set to close among its 166 stores – putting around 4,000 jobs at risk.
Debenhams’ lenders who are mainly high street banks and US hedge funds such as Barclays, Bank of Ireland and Silver Point, will ensure the business has access to £200m in emergency funding following its slump in sales and increasing high street rents.
Responding to the Debenham’s crisis was Labour’s shadow business minister Bill Esterson, who stated the government must meet urgently with the unions and Debenhams to ensure workers are safeguarded.
He added: “Labour’s five-point plan, from our reform of business rates to our empty shops register, will rejuvenate the high street and town centres. It is vital that we support retailers, their staff and the communities they serve.”
Today FTI Consulting, a global consulting firm, was appointed to the administration before handing Debenhams over for a mere £101.8m along with debts of £520m and further pension obligations – and will continue to search for bidders to subsidise the company’s outstanding debts.
In a statement, they said: “The Group has been sold for a price which in our opinion is the best price reasonably obtainable at the time of sale” and added the company would be “immediately marketed for onward sale”.
And although trading is thought not to be affected by the move, it means Mike Ashley and his near £150m stake in the company will be erased.
The Sports Direct owner revealed his lack of sense of control over the weekend when he suggested he would take over as chief executive and demanded the Debenham’s board be investigated with two members told to take lie detector tests about a disputed meeting.
In a statement issued by Sports Direct on Sunday, it was suggested that “misrepresentations” were made to ensure Sports Direct would sign a non-disclosure agreement that locked them out of any ability to trade in the bonds or equity of Debenhams “for a period of time”, and added, Ashley and two other colleagues had already taken lie detector tests that “showed without any doubt” they were stating the truth about the meeting.
However, Terry Duddy, Debenhams’ chairman seemed to have a different attitude, stating that its customers, colleagues, pension holders, suppliers and landlords could be reassured that the company would be able to “move forward on a stable footing”.
“We remain focused on protecting as many stores and jobs as possible, consistent with establishing a sustainable store portfolio in line without previous guidance,” he added.