Debenhams Shares Soar as Lifeline Loan Secured -- Update
12 Février 2019 - 12:17PM
Dow Jones News
(Update includes bullets, share price move, analysts' comments
and context)
--Debenhams shares have skyrocketed after the company secured a
12-month loan worth GBP40 million.
--The department-store chain has also agreed to enter a
strategic sourcing partnership with supply-chain manager Li &
Fung.
By Oliver Griffin
Shares in Debenhams PLC (DEB.LN) soared Tuesday after the
company said that it secured an additional 12-month loan worth 40
million pounds ($51.6 million) and that it has agreed to form a
strategic sourcing partnership with Li & Fung Ltd.
(0494.HK).
The U.K. department-store chain announced in January that it was
in talks with lenders to refinance its existing bank loans after it
warned margins in the first half of fiscal 2019 will show erosion
due to promotional activity.
At the same time, Debenhams said like-for-like sales in the six
weeks ended Jan. 5 fell 3.4%, while group gross transactional
value--a key metric for retailers that shows the amount of money
going through the tills--fell 3.8% in the same period.
The new loan contains provisions for a step-up in pricing in the
second quarter of the calendar year, Debenhams said. The loan will
act as a bridge to ease broader refinancing and
recapitalization.
David Madden, a market analyst at CMC Markets UK, said the new
loan will act as a lifeline in the medium term.
"The access to funds will give the group some much-needed
breathing space," Mr. Madden said, adding Debenhams needs to
undergo major restructuring if it is to survive in the long
term.
Further updates will be made in due course, Debenhams said.
The company said it has in principle entered an agreement with
supply-chain manager Li & Fung to develop a strategic sourcing
partnership that will cover its own-brand sourcing.
Tony Shiret of Whitman Howard described the tie-up with Li &
Fung as potentially significant.
"[The deal] may be seen as confirmation by a very serious global
sourcing operator that it doesn't regard Debenhams as a write-off,"
Mr. Shiret said.
The partnership will deliver improved product quality and lead
times, as well as higher margins, Debenhams said.
Initial orders under the agreement are expected to begin
shortly.
Debenhams shares at 1027 GMT were up 39%, or 1.20 pence, at 4.34
pence each.
Write to Oliver Griffin at oliver.griffin@dowjones.com;
@OliGGriffin
(END) Dow Jones Newswires
February 12, 2019 06:02 ET (11:02 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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