Administration looms as Debenhams reveals restructuring plans

Following the announcement of Debenhams new restructuring plans, Patrick O’Brien, UK Retail Research Director at GlobalData, a leading data and analytics company, offers his view:

“Mike Ashley’s attempt to create a ‘House of Debenhams’ looks doomed to be an expensive failure after Debenhams revealed its restructuring plans. It looks likely that creditors will approve plans to take control of the company in return for £200m of additional financing, wiping out Sports Direct’s near 30% equity stake, and all other shareholders. Not that Mike Ashley is in retreat, just three minutes after Debenhams’ announcement, he made public a £100m cash bid for Debenhams Danish business Magazin du Nord, with an offer to take over as CEO to assist with the restructuring process.

“Should Ashley’s attempt to disrupt Debenhams’ plans fail, landlords will be the other big losers here as the likely pre-pack administration will mean the new owners – the bondholders and other lenders – will be able to exit or renegotiate leases on their stores. We think it likely that this will result in a smaller store portfolio than planned, with accelerated job losses, though landlords are becoming much more realistic about renewal terms – yesterday Debenhams’ mid-market rival Next revealed that it negotiated an average of 29% discount on the leases it renewed last year.”

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