Apr 2, 2019

Debenhams refinancing costs threaten to offset any savings

Debenhams is set to burn through tens millions of pounds in fees after securing its latest rescue deal, ratcheting up the pressure on the struggling retailer as it battles to stem falling sales, cut costs and fight off the attentions of its biggest shareholder. Debenhams said in last week's statement that the pricing was "In line with market pricing for facilities of this nature and by reference to the prevailing market conditions affecting the group". The extent to which higher interest costs are actually incurred will depend on whether Mike Ashley's Sports Direct group, Debenhams' biggest shareholder, supports the refinancing, or lenders take control of the company. If Mr Ashley acquires the group, the existing debt could be called in and he would have to use the Sports Direct balance sheet to recapitalise Debenhams - a price some analysts think would be too high for him to justify. Debenhams is also incurring significant costs fighting off the attentions of Mr Ashley, who has made a series of proposals to Debenhams including buying its Danish operation and proposing a 5p a share takeover bid.

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