Debenhams just collapsed into administration after rejecting a final rescue offer

Andrew Cummings
April 9, 2019

Under the latest proposal, which would effectively delay the 240-year-old department store's likely administration, Debenhams' lenders would have to agree to write off £82 million of its £720 million debt.

Debenhams has 165 stores and employs 25,000 people.

"It is disappointing to reach a conclusion that will result in no value for our equity holders".

Debenhams' descent into administration is another blow to a retail sector already reeling from the collapse of BHS, music store HMV, electronics firm Maplin, department store House of Fraser and cycle shop Evans.

All of Mr Ashley's offers were rejected, including a takeover valuing the business at stg£61.4m (€74.3m) and a plan put forward in the early hours of Tuesday morning for Sports Direct to underwrite a stg£200m (€231m) rights issue - a way of raising cash from shareholders.

The decision has wiped out shareholders, including Newcastle United FC owner Mr Ashley.

Administrators have sold the group to a newly-incorporated company controlled by Debenhams' lenders, including hedge funds thought to include Alcentra, Angelo Gordon and Silver Point Capital. It's lenders have now taken control of the company.

Suppliers, workers, pension holders and customers will also not be affected.

A BBC business reporter notes, "This isn't one of those potential administrations where all jobs are immediately at risk the next day".

"We can still expect Debenhams to continue trading, though store closures are inevitable as Debenhams cuts its cloth to fit today's increasingly digital retail environment", he said. "I would like to thank them all for their recent and continuing support". Members can therefore be reassured that the schemes are carrying on as usual.

Debenhams has been struggling for a while and issued three profit warnings a year ago.

The pre-pack administration undertaken by the struggling department store chain will see its debt reduced and comes ahead of a wider restructuring which will see around 50 stores.

The higher offer was rejected because Mr Ashley wanted to be chief executive.

Sports Direct declined to comment.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "As an investment, Debenhams is a tale of woe from start to finish".

He added that the business "has been out-manoveured by more nimble competitors, failed to embrace change and was left with a tiring proposition".

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