Feb 12, 2019

Debenhams shareholders will not be served by refinancing plan

Since the store chain's latter-day owners launched an initial public offering in 2006, a legacy of private equity debt on top of property writedowns and falling sales has sent shares in Debenhams down 98 per cent. Debenhams seems to have calculated that £40m is just enough to see it through its spring working capital peak - when taxes, rent and rates all fall due - and avoid recourse to 29 per cent shareholder and would-be secured lender Mike Ashley, he of the Sports Direct personal fiefdom. Few other investors will buy into Debenhams shares from now on, knowing a refinancing must involve some form of equity fundraising that greatly dilutes all holdings. Not even Mr Ashley, for all his love of department stores, can buy more Debenhams shares because that would trigger a mandatory takeover bid - and a change of control clause in Debenhams bond covenants could leave him liable to repay out-of-pocket bondholders at their full value. Debenhams may be adopting Mr Selfridges motto: "Business as usual".

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