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Gloucestershire Business News

Debenhams considers pre-pack administration

Struggling department store chain Debenhams is reported to be considering a potential pre-pack administration to save the business and stave off a takeover by Mike Ashley and Sports Direct.

The pre-pack option is said to be a fall-back, amid growing boardroom tensions between biggest shareholder Sports Direct and Debenhams, as reported by Retail Gazette.

A pre-pack administration is an insolvency process in which a company enters administration and then is immediately sold to a connected party, such as a lender, while shedding most of its liabilities. Pre-pack administration does not require shareholder approval.

In the meantime, Debenhams, which has its last remaining county store in Gloucester, continues negotiations with lenders to secure a £150 million lifeline to help keep it afloat. It recently reported that negotiations were at an advanced stage. If this works out, the pre-pack administration may not be necessary as the chain would then be able to explore other options for its remaining debt.

It is thought that the main focus of negotiations is to lock in a deal with lenders before Debenhams meets with Sports Direct next month.

Last week, Debenhams said it would consider a proposal from Sports Direct to provide a £150 million unsecured loan, in exchange for Mike Ashley becoming the retailer's chief executive.

Debenhams has already had a short-term cash inject of £40 million this year. The current negotiations for a further £150 million includes £40 million that would be used to refinance that cash injection. Debenhams is currently in £520 million of debt.

Punchline said: "We hope, for the sake of jobs and shoppers in the city, that a deal can be found for Debenhams which helps it grow and get back to the business it once was. The department store has been in Gloucester for longer than any of us care to remember and it would be sadly missed if it went."

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