Doubts about the future of Debenhams and its 12,000 workers are growing after suitors were given until the middle of this week to make a £300 million rescue bid for the department stores chain.
Prospective buyers, which include Mike Ashley’s Frasers Group, have been told to make a binding commitment by the close of business on Wednesday, or walk away.
Advisers for Debenhams are turning up the heat on bidders, while they weigh alternative options for the ailing retailer. They could liquidate the chain or sell parts of the business to the group of hedge funds that owns its debts, led by Silver Point Capital.
Debenhams, which has 124 stores and is Britain’s largest department stores chain, was put into administration again in April to prevent winding- up orders from creditors. In April last year it fell into the hands of its lenders, comprising hedge funds and banks, after struggling for years to stay afloat. Frasers Group lost about £150 million on the debt-for-equity swap.
The list of potential suitors shortened this month when Reliance Retail, controlled by Mukesh Ambani, India’s richest man, withdrew from the race.
Frasers is understood to have tabled an offer of about £125 million. It is thought to have doubts about the value of stock and a perceived lack of transparency in trading and store closures. Mr Ashley’s empire is thought to be interested in stores that can be converted into Flannels or Sports Direct shops. He is trying to take Frasers upmarket.
He is frustrated by the large loss he ran up in his previous pursuit of Debenhams and has called for politicians to scrutinise the administration process and for its former directors and advisers to be sent to prison.
Magasin du Nord, which has seven shops in Denmark and is considered to be Debenhams’ “crown jewel”, is being marketed in a separate process by Lazard, the investment bank. Hilco remains on standby as a liquidator to the chain and is assessing how much could be realised by selling stock and the stores’ fixtures and fittings.
Last month Mark Gifford, 55, chairman of Debenhams, denied that the business was on a “cliff edge” and insisted that trading had been better than expected. This has led to the management working on a restructuring plan that could lead to its present owners keeping hold of the business, although with significantly fewer stores. Mr Gifford has said that between 30 and 40 shops could close unless business rates were reduced next year.