Debenhams has been sold to a new company, Celine Newco I Ltd, controlled by its lenders in a pre-pack administration process. It will now push ahead with plans to close up to 50 stores and develop a lower cost approach for another 20 stores.
The company’s directors rejected an investment from Sports Direct which owned some 30 per cent of the business, choosing instead the pre-pack administration which will give it access to some £200m of additional funding.
In a statement, Debenhams said: “The Group has undertaken a thorough review of its store estate in the context of the current and future retail environment and plans to proceed with a restructuring of the estate that, if approved, will result in a significant overall reduction in the Group’s rent burden and underpin a sustainable future for the Group. This is a critical component of the Group’s restructuring plan, and executing this is in part linked to the provision of the £200m facilities and lenders implementing a £100m debt for equity swap.”
In its results for the year to 1st September 2018, Debenhams said: “Market conditions remain volatile and challenging. We are therefore taking a prudent approach and assume no improvement in the trading environment for the foreseeable future. We have identified a further £30m of cost savings for FY2019, annualising to c.£50m by FY2020.
“Key elements of these savings include: further review of support centre overhead; further warehouse consolidation and automation; a further review of central costs following the implementation of the new operating model; and an end-to-end structural review of the business, including the efficiency of the supply chain.”
Simon Kirkhope, Andrew Johnson and Chad Griffin of FTI Consulting LLP were appointed as Joint Administrators on 9th April 2019. They immediately sold the business to Celine Newco I Ltd for £101.81 million.
The administrators said the transaction was a sale subject to £520m of financial debt and the group’s pension obligations and therefore equivalent to a sale price of £621.81m of financial debt (before taking account of cash balances) and all of the Group’s pension obligations (which hold £60m of security).