Debenhams Plunges Into Administration

Debenhams will join the list of high street businesses that have fallen into administration, after lenders took over the company from their shareholders, including Sports Direct owner Mike Ashley.

Mike Ashley spent £150 million in trying to accrue a 30% stake in Debenhams, and made last minute £200m cash payment to become the chief executive, however the company lenders rejected the offer.

Lenders Buy Debenhams

Debenhams was valued at over £300 million less than 12 month ago, yet this week it sat on the market at £23 million.

It now looks inevitable that the 165 outlets will be dwindled down, store closures will occur, and jobs will be at risk across the country.

Lenders paid £101.8 million pounds to buy the Debenhams group of shareholders, taking on an extra £520 million worth of debt.

The purchase of the company will allow Debenhams to continue trading, while the new lenders can implement their plans to turn the company’s fortunes around.

The Chairman stated:

“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.”

He also thanked every customer and colleague, for their recent and continuing support and that Debenhams will move forward on a ‘stable footing’.

Store Closures Impending

It looks like Debenhams will close around 50 stores, almost a third, and will allow an extra £100 million to be injected into the company.

Richard Lim, the chief executive of the industry analysts Retail Economics, said: “Debenhams has fallen victim to crippling levels of debt, which has paralysed its ability to pivot towards a more digital and experience-led retail model.

“Put simply, the business has been outmanoeuvred by more nimble competitors, failed to embrace change and was left with a tiring proposition. The industry is evolving fast and it paid the ultimate price.”

Pressure Mounts On High Street Businesses

Business must be aware that pressure is mounting on the high street.

The cost of warehouses, stores and staff seems to be the crippling factor for high street businesses.

We wrote a blog last week about the potential for business rates to decrease in the coming years, however for some this change might come a little too late.

More and more businesses are failing to make money, as more customers purchase online. It’s difficult for these businesses to adapt, and we are seeing that become a real issue.

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