Debenhams is to press ahead with a plan to close 22 stores as creditors agreed to a last ditch deal just hours after administrators rejected all rescue bids for the struggling chain.
Fears that First Direct owner Mike Ashley could block the Company Voluntary Arrangement (CVA) vote this afternoon appeared unfounded after it was revealed that the debt ringfencing agreement would go ahead, paving the way for turnaround plans outlined by a consortium of lenders who took control in April.
Administrators at FTI Consulting said yesterday morning that it considered all buyout bids to be “not at the level required to be taken forward”.
Consortium Celine, which took control in April after main Debenhams shareholder Ashley made several unsuccessful approaches, said that it planned to “position Debenhams for a long-term future”. It gave assurances that it is a “committed long-term owner” and has provided Debenhams with £200 million in fresh funding.
Kirkcaldy is among the 22 stores already named as earmarked for closure, with a threat to 1,200 jobs UK-wide.
Why is Debenhams closing stores?
Jim Tucker, restructuring partner at KPMG and joint supervisor of the CVA - which ringfences the firm in a legally-binding agreement with creditors to allow a proportion of debt to be paid back over time - said: “The approval of these CVAs marks an important step forward for Debenhams, which can now put the next phase of its financial and operational turnaround plans in motion.
“As with all CVAs, more than 75 per cent of creditors had to vote in favour in order to pass the resolution. Today’s vote saw the significant majority of all voting creditors choose to approve the two proposals.”
Under the turnaround plan, rents are also set to be slashed on more than 100 outlets.
Stefaan Vansteenkiste, a spokesman for Celine, said: “The investor consortium is a committed long-term owner, which has provided Debenhams with £200 million in fresh funding for the financial restructuring process and to fund the company’s operating turnaround.
“Within the consortium, there is extensive turnaround experience, which we will deploy to support the management’s plan and to position Debenhams for a long-term successful future.”
Debenhams executive chairman Terry Duddy said: “I am pleased that our new owners have confirmed their commitment to Debenhams and remain supportive of our plans to restructure the business."
In April, a bid of £150m by Sports Direct owner Mike Ashley - which would have seen Ashley placed onto the board as chief executive - was rejected, followed by a second offer to pump £200m into the business. After both were rejected, the firm fell into a pre-pack administration. It is understood he was not among the most recent bidders for the chain.
Details were not given on the number of suitors or level of bids. Bidders would have had to refinance the chain’s debts, which ran to more than £500m.
A spokesman for the Debenhams Pension Schemes said: "The trustees welcome the news that Debenhams' creditors have voted in favour of the CVA. They hope that the CVA process will complete successfully and that it will facilitate a sustainable solution for Debenhams, which will ensure that the schemes are supported in the long term.
"As the trustees have made clear previously, all pensions will continue to be paid as normal during the CVA process. The trustees will continue to keep members informed of developments."