Troubled UK department store chain Debenhams has been taken over by its lenders, wiping out shareholders including Mike Ashley’s Sports Direct and creating a path for store closures.
The department store group’s 165 outlets will continue to trade under a pre-pack deal that only affects its listed holding company.
In a letter to shareholders posted on the website of FTI Consulting, it was confirmed that executives Simon Kirkhope and Andrew Johnson had been appointed joint administrators of Debenhams.
The added that the group’s two principal operating companies had immediately been sold to a new company owned by Debenhams’ lenders.
Related documents showed Debenhams’ lenders paid £101.8m for the group and also took on £520m of debts and its pension obligations, taking the total cost of the deal to £621.81m. That sum is in line with the total value of Debenhams’ debts at the time it fell into administration.
The letter said the business had been “sold for a price which in our opinion is the best price reasonably obtainable at the time of sale”. It added that there was provision for Debenhams, which employs 25,000 people in the UK, to be immediately sold on for a price that would repay the company’s debts and pension liabilities in full, and so yield a return for shareholders.
Mike Ashley has described the administration of Debenhams as a "national scandal", with the Sports Direct owner urging the process to be reversed.
Ashley, who has made numerous attempts at a takeover, said in a statement to the stock exchange: "As normal, politicians and regulators fiddled whilst Rome burnt. These politicians and regulators have proven to be as effective as a chocolate teapot.
"I restate my call for the advisers to go to prison given their skulduggery in undermining shareholders and other stakeholders, such as employees and pensioners. I call on the authorities to reverse the administration process so that a full, better and appropriate solvent solution can be found."
Terry Duddy, the 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, while 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.”
RPA Perspective The group’s lenders want to close about 50 stores via a CVA. Details of the plan, which landlords must approve, are expected to be announced within weeks. The administration paves the way for the lenders to pump another £100m into the business.
Sports Direct owner Mike Ashley, who spent at least £150m building up a near 30% stake in Debenhams, lost out after the company and its lenders turned down his last-ditch offer of a new £200m cash injection, as it was dependent on him becoming chief executive.
The proposal made in the early hours this morning came after an offer of £150m yesterday was also rejected for the same reason.
Debenhams had a market value of more than £300m less than a year ago. However, after a succession of profit warnings and and a bitter battle with its major shareholder, Sports Direct, the group’s shares slumped in value to less than £23m on Tuesday morning. There is virtually no chance of shareholders getting anything back.
