The future of Debenhams stores nationwide has been uncertain for a while, and now the retailer has rejected a new deal, pushing it further to the brink of entering administration.
On Monday (9 April), it rejected a £150 million offer from Sports Direct, owned by Mike Ashley, pushing it further to the brink of entering administration.
This overnight offer, which was turned down because Mr Ashley wanted to be chief executive, would have seen Sports Direct underwrite the raising of £200 million by issuing new shares.
Lenders taking over Debenhams means that all shareholders have been wiped out, including Mike Ashley’s 30 per cent stake.
The lenders are made up of High Street banks and US hedge funds, including Barclays and Bank of Ireland, alongside Silver Point and GoldenTree.
Last year, Debenhams issued three profit warnings and it now has an accrued debt of £640 million.
Debenhams will now sees shops continue to trade, but the business itself will come under the control of its lenders. Store closures are also expected, putting thousands of jobs at risk.
What is pre-pack administration?
Pre-pack administration lets a company sell itself as a going concern, without affecting the operation of the business.
Administrators then take over the running of the business in order to protect creditors, but shareholders lose their investments.
Will shops remain open?
A pre-pack administration means that shops will continue trading for now, but Debenhams has proposed closing around 50 branches from next year.
The retailer also intends renegotiating rents with landlords in order to help with its funding problems.