Company Raises £35m to Cut Debts and Fund Turnaround
The owner of Boohoo and Debenhams is raising £35 million from shareholders in a move that could trigger a renewed conflict with Sports Direct founder Mike Ashley.
The company, which also owns Oasis, Warehouse, Pretty Little Thing, and Karen Millen, announced on Tuesday that the new capital would be used to reduce debts and support its turnaround strategy. This strategy includes significant cost reductions, the sale of a distribution centre, and operating as an online marketplace for other brands.
The fundraising, supported by Boohoo founder Mahmud Kamani, comes less than 18 months after the group raised £39 million from shareholders as it strives to revive sales amid competition from rivals such as Shein and Vinted.
Debenhams, which rebranded from Boohoo last year, experienced a share price decline of nearly 9% on Tuesday morning. Independent retail analyst Nick Bubb commented:
“Investors may be dismayed at the group’s financial situation.”
Analysts at Peel Hunt noted that Debenhams was “bumping up against covenants” on a three-year £175 million debt facility.
Debenhams stated that all its brands are now trading profitably and that it is on track to deliver underlying group profits of £50 million for the year ending February, consistent with prior guidance.
“The turnaround plan is going apace.
The fourth quarter has continued to see material improvements in the group’s [sales] trend, alongside the continued removal of significant cost from the business as it is simplified.”
The company also indicated that institutional shareholders have already committed to supporting £24 million of the fundraising, which is priced at 20p per share, representing an 11% discount to Monday’s closing price.
However, it remains uncertain whether Ashley’s Frasers Group, Debenhams’ largest shareholder with nearly a 30% stake, will support the cash call.
Frasers has previously criticized the group’s plans to sell assets, and Ashley had proposed a board seat but was blocked by the company from putting that proposal to shareholders in 2024. A few months later, Ashley withdrew from joining the board.
Last month, Debenhams announced it had abandoned plans to list on the stock market but indicated on Tuesday that it is still considering “non-core asset disposals at best possible value” and licensing of brands as part of its debt reduction efforts.
“The board has multiple strategies to de-leverage the group further,”
the company said in a statement.
Ashley acquired the Debenhams brand in 2021 following the department store’s collapse.
In March last year, Frasers voted to block formalization of the group’s name change from Boohoo to Debenhams.
