Debenhams have secured a cash injection of £40 million to buy it extra time as it battles to secure a long-term deal.
The department store has called it a “first step” towards a sustainable future. The firm issued three profit warnings last year and is taking with lenders over renegotiating its debts. It is expected to close 20 outlets this year to help with the struggles.
The extra money made will extend the retailer’s current £520 million borrowing facilities with banks for 12 months and enables it to continue talks over a long-term refinancing.
The news sent the retailer’s shares up by 40%.
Debenhams chief executive Sergio Bucher said: “Today’s announcement represents the first step in our refinancing process.
“The support of our lenders for our turnaround plan is important to underpin a comprehensive solution that will take account of the interests of all stakeholders and deliver a sustainable and profitable future.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “This debt agreement is a lifeline for Debenhams, but isn’t going to solve its fundamental problems.
“Trading conditions remain extremely challenging and the business has a tightrope to walk between cutting costs and investing in improvements.”
High street stores have been under pressure since everyone is choosing to shop online instead of in store. Debenhams has 165 stores and employs around 25,000 people, they have reported a pre-tax loss of £491.5 million last year and said more recently that sales have fallen sharply over Christmas. It was announced last year that they plan to close 50 stores within three to five years putting 4,000 jobs at risk.
Mr Khalaf said: “Debenhams’ longer term prospects are still in the balance, and recent data showing a deterioration in the UK economy isn’t exactly going to help matters.
“For now, Debenhams has kicked the can down the road, but will have to come back for some tough negotiations with quite a lot of internal dissent amongst its stakeholders.”
