After months of speculation, Debenhams has confirmed that it's planning a fundraising to pay down some of its hefty debt pile. The company said it will raise £323m, of which 40 per cent will come through a firm placing with the remaining 60 per cent coming from a placing and open offer of new ordinary shares.
A 'market book build process' is being run today to determine the issue price, which analyst John Stevenson at broker KBC Peel Hunt estimates could be in the region of 75p a share, 17 per cent below the current price.
Interestingly, Debenham's private equity backers - CVC and Texas Pacific which own a combined 20 per cent of the retailer - have said they will not participate in the fundraising, and as a result will forefeit their board seats with immediate effect. Although the investors remain subject to a lock-in during the offer period, it seems probable that they will be looking to offload their stakes at some point. Analysts are hopeful that their stakes can, in fact, be placed before the lock-in commences after the market closes today, to avoid the prospect of a lengthy stock overhang.
However, Mr Stevenson expressed surprise that Debenhams hadn't asked for more money, pointing out that while it may give them the firepower to fund opportunistic acquisitions, significant working capital would be needed to integrate any deals, which may be a stretch given the tough retail environment.
Debenhams trading does seem to be holding up better than some of its peers, though. In a trading statement released alongside its fundraising plans, it said that like-for-like sales in the 12 weeks to 23 May were down just 0.8 per cent - much better than the 2 per cent decline analysts had expected - with gross margins up 90 basis points and average transaction values up 3 per cent. The company's bankers also agreed to relax covenants on its debt facilities
