Troubled retailer Debenhams has entered into a pre-pack administration on Tuesday, and the company has been taken over by its lenders.
FTI Consulting has been appointed to undertake the administration process, the company was on the brink as share were suspended on Tuesday morning, the company insists stores will continue to trade.
The retailer was in £720m mountain of debt, the administrators sold the newly incorporated company that is under the control of Debenhams lenders.
Hours after Sports Direct Mike Ashley £200m offer was rejected the retailer went into administration, he will have lost his 30% stake in the company along with other investors.
The new ownership of Debenhams will now have access to £200m in emergency funding however, there will be 50 store closures and job losses as the company restructures.
Terry Duddy, Debenham’s chairman said, “It is disappointing to reach a conclusion that will result in no value for our equity holders. However, this transaction will allow Debenhams to continue trading as normal; access the funding we need; and proceed with executing our turnaround plans, whilst deleveraging the group’s balance sheet.
“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.”
A spokesman for the Debenhams pension schemes said, “The trustees have been informed that Debenhams has been placed into administration. Debenhams is not the sponsoring employer of the schemes.
“The relevant employer for the schemes is Debenhams Retail Limited. Debenhams Retail Limited has been transferred to a newly incorporated company and continues to trade and operate as normal. Members can therefore be reassured that the schemes are carrying on as usual.
“The trustees have worked with our specialist advisers throughout the process of the company’s refinancing and restructuring, to ensure that members’ interests are taken into account, and we have consulted closely with The Pensions Regulator and the Pension Protection Fund at every stage.
“We are in the process of writing to all members with further information, and we will continue to keep them informed.”
George Charles from money-saving website www.MoneySavingHeroes.co.uk said, “The high street today has taken a massive hit in Debenhams going into administration. It is still a favourite among the consumers that do take to the high street, whether regularly or occasionally, and is going to be one of the biggest hits the high street has seen so far. Stores will remain open for the foreseeable future, but as it’s now in the hands of the lenders, it’s only a matter of time before stores begin to close, changes are made to decrease the debt and consumers feel the brunt of this.
“In this day and age where smaller, more affordable brands are coming through, embracing digital and moving with the trend’s consumers are being faced with, Debenhams simply haven’t been able to keep up, something that’s affected them strongly.
“With all of the bad news surrounding Debenhams, it is hard to see how the current situation can be reversed. As with Brexit, it’s the uncertainty that makes people most nervous, but sadly we’ve seen this with many other brands in the past few months and, if what’s happened to other brands is to be expected, Debenhams are in for a tough ride.”