Debenhams seeks £200m in new funds

Debenhams is close to receiving a £200m lifeline from lenders that would prevent the department store falling into the hands of largest shareholder Mike Ashley.

A deal finalising its borrowing facilities, which are larger than expected, could be announced as soon as today, according to Sky News.

The retail chain said earlier in the month that it was in “advanced negotiations with its current lenders about additional facilities of approximately £150m”.

The figure has increased by £50m after Ashley’s company, Sports Direct International, offered an unsecured loan of £150m to Debenhams.

But that offer came with a catch that would see Sports Direct take on a further five per cent of the company’s shares and make Ashley chief executive.

Lenders have ruled out that deal while the new £200m proposal would allow the department store chain to trade through the rest of the year and provide time to restructure its finances.

It could see Debenhams placed into a pre-pack administration and sold to its lenders, with FTI Consulting lined up to handle that process.

If that option was pursued it would also likely result in a debt-for-equity swap to cut the chain’s £560m debt and the closure of stores not making any profit.

Under current plans up to 20 stores could close early next year, with dozens more identified as potential closures.