United Kingdom retailer Debenhams goes into pre-pack administration

United Kingdom retailer Debenhams goes into pre-pack administration

Earlier today, the high street chain fell under the control of its lenders after rejecting a £200million lifeline offer from Sports Direct.

The company's chairman, Terry Duddy, said: "It is disappointing to reach a conclusion that will result in no value for our equity holders".

Prepack administration is typically a court-based process that can allow creditors to take control in a pre-agreed plan while the company continues to operate as normal.

A statement from Debenhams says: The Board confirms that it received a revised, highly-conditional, proposal from SDI in the early hours of 9 April, which indicated a willingness of Sports Direct to underwrite an equity issue of £200 million.

The deal also means that shareholders, such as Sports Direct which holds a 30 per cent stake in Debenhams, will see their investment wiped out.

Debenhams' operating companies have been sold to the group's lenders in return for reducing its £620m debt pile and injecting almost £100m of new funds to keep the group afloat.

The news follows reports of tumbling profits and a previously-announced plan to axe 50 of its 166 stores nationwide. "I would like to thank them all for their recent and continuing support".

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It is expected that later this morning the operating company of Debenhams will be placed into a new subsidiary vehicle, leaving the holding company as a shell.

"In the meantime, our customers, colleagues, pension holders, suppliers and landlords can be reassured that Debenhams will now be able to move forward on a stable footing".

In business since 1778, Debenhams has been battling for survival after a consumer shift online and to cheaper outlets left it with too much retail space on struggling high streets, destroying 90 percent of its share value in the past year.

Only two months ago, it was announced that the chain was set to close 90 stores across the United Kingdom and Ireland.

Mr Ashley's latest offer came after Sports Direct accused Debenhams of "a sustained programme of falsehoods and denials".

Hargreaves Lansdown analyst Laith Khalaf said it had been downhill for the group since it floated on the stock market - for the third time - in 2006.

Richard Lim, chief executive at Retail Economics, said: "We should not understate the significance of this collapse given the vast property portfolio, number of jobs impacted and the reverberations felt across many high streets".