Key facts
- Debenhams owner is raising £35 million from shareholders.
- The funds will be used to reduce debt and support turnaround plans.
- The company's brands are all trading profitably.
- Debenhams is on track to deliver underlying group profits of £50 million for the year to the end of February.
- The fundraising is priced at 20p a share, an 11% discount to Monday's closing price.
- Mike Ashley's Frasers Group is the largest shareholder with a near 30% stake.
The owner of Boohoo and Debenhams is seeking to raise £35 million from shareholders, a move that could lead to renewed conflict with Frasers Group founder Mike Ashley. The company, which also owns Oasis, Warehouse, Pretty Little Thing, and Karen Millen, stated the funds would be used to reduce debt and finance its turnaround strategy.
These turnaround plans include cost reductions, the sale of a distribution center, and operating Debenhams as an online marketplace for other brands. This fundraising effort follows a £39 million capital raise less than 18 months ago, as the group navigates intense competition from rivals like Shein and Vinted.
On Tuesday, Debenhams' share price fell by 16%. Analysts at Peel Hunt commented that the company was "bumping up against covenants" on its £175 million debt facility. Despite these challenges, Debenhams reported that all its brands are trading profitably and it remains on track to achieve underlying group profits of £50 million for the fiscal year ending February, in line with prior guidance.
Institutional shareholders have already signaled support for £24 million of the fundraising, which is being offered at 20p per share, an 11% discount to Monday's closing price. However, it is uncertain whether Frasers Group, which holds a nearly 30% stake and is Debenhams' largest shareholder, will participate. Frasers has previously opposed the group's asset sales, and Mike Ashley's attempts to join the board or become CEO of Boohoo were previously blocked by the company and its shareholders.