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Lenders take control at UK department store Debenhams
[LONDON] British department store chain Debenhams has been taken over by lenders after falling into administration, it said Tuesday, amid tough times on the UK high street.
Retail stalwart Debenhams, whose history dates back to 1778, added in a statement that its new owners will inject "significant" funding of £200 million ($S354.2 million) into the struggling business.
Debenhams, which has 165 stores across Britain and some 25,000 staff, appointed administrators FTI Consulting who sold it to a newly incorporated company controlled by its lenders.
Department stores are among a string of major UK retailers who have fallen victim to fierce online competition, rising business property taxes and stretched household budgets, all while Brexit uncertainty grinds on.
Debenhams declined a last-gasp takeover bid from tycoon Mike Ashley, who owns sportswear retailer Sports Direct and had purchased collapsed department store House of Fraser last year.
"It is disappointing to reach a conclusion that will result in no value for our equity holders," said Debenhams chairman Terry Duddy.
"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.
"Our customers, colleagues, pension holders, suppliers and landlords can be reassured that Debenhams will now be able to move forward on a stable footing."
The so-called pre-packaged administration deal wipes out the stakes held by all shareholders including Ashley.
The deal also axes plans for an emergency shareholder meeting in which Ashley was to seek his appointment to the board and oust most other directors.
"It's game over for Mike Ashley and Debenhams shareholders," said Hargreaves Lansdown analyst Laith Khalaf.
"The writing's been on the wall for some time now, and while Sports Direct persisted with attempts to rescue the retailer, its terms proved unacceptable to Debenhams and its lenders."
XTB analyst David Cheetham added that the development had been "a long time coming" for Debenhams.
"The future of the department store is highly uncertain and the fate of the company's assets as well as that of around 25,000 employees now lies in the hands of several high street banks and US hedge funds," he noted.
"The firm's demise has played out over several years and Debenhams has now become yet another iconic failure of the British high street."
Long-established UK retailers are battling sliding consumer sentiment and Brexit uncertainty alongside the faltering economy.
They also face fierce competition from the likes of online US titan Amazon.
The last 18 months has seen the demise of clothing outlet Calvetron, music retailer HMV, the Toys 'R' Us toy chain, Maplin electronics stores and discount store Poundworld.