Debenhams shares suspended as administrators take control

The struggling UK department store saw its share price tanked and its stock suspended from trading on Tuesday after it fell into administration and its lenders took the reins.

Debenhams Source: Bloomberg

Debenhams lenders have taken control of the struggling department store after it went into administration on Tuesday as the UK’s challenging retail environment takes another victim.

The British retailer, once the largest department store in the UK, has suffered at the hands of consumers shift to online, leading to a sharp decline in high street sales.

Combine this with a rise in commercial rents and ballooning debt and the myriad of retail headwinds eventually proved too much for Debenhams.

'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, 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.’

Administrators push ahead with store closures

Despite the news, Debenhams will continue to keep trading, but its lenders have said that they will move forward with cost-cutting measures that will see them close around 50 high street stores that are underperforming.

Administrators said that the store closures are ‘critical’ to Debenhams survival, but the decision will see around 4,000 jobs put at risk.

The news comes at a time when the retail sector has suffered heavy losses, with high street giants like BHS, electronics retailer Maplin and fellow department store House of Fraser all collapsing.

Last chance for Mike Ashley’s £150 million Debenhams bid

Sports Direct owner Mike Ashley confirmed his offer to underwrite a £150 million share issuance for the ailing department store on Tuesday, so long as he is made CEO.

However, it is unlikely that his offer will be accepted by shareholders, as many are against him taking the helm, fearing he will gut the business, keeping only the stores he values for his own interests.

Furthermore, his offer is only marginally better than the one offered by administrators, with the lenders offering to write-off £148 million worth of debt under the terms of the offer.

‘In theory a deal [with Ashley] could be struck, but relations seem far from cordial, and the Debenhams management look set on giving the lenders control of the high street chain,’ Laith Khalaf, senior analyst at Hargraves Lansdown said.

‘The difficulty is that as part of its recent refinancing, Debenhams has already agreed to terms which means lenders approach any negotiations from a position of strength,’ he added. ‘It seems most likely therefore, that Debenhams shares will soon cease to have any value, as lenders take full control of the retailer.’


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