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Debenhams is lining up a £50m cash buffer from its lenders as it braces for a difficult Christmas trading period.
The ailing department store, which is owned by a consortium of banks and hedge funds after falling into administration in April, is lining up the funds in addition to a £200m lifeline put up as part of a rescue restructuring completed in May.
Sources said Debenhams has continued to find trading tough, along with the rest of the high street, but is trading within its cash targets and has not reached the limit of its funding package. Sources said Debenhams’ lenders remained supportive of the company’s turnaround plans.
Debenhams, which employs more than 20,000 staff, is set to close at least 22 of its 166 UK stores in January with the loss of about 4,000 jobs. It has already forced through rent cuts on many others as part of the survival plan approved by creditors.
The retailer is close to announcing a new chief executive to replace the former boss Sergio Bucher, who was ousted in April. The board is understood to be considering a shortlist of just two contenders, thought to include Stefaan Vansteenkiste, a turnaround expert and managing director of consulting firm Alvarez & Marsal, who was brought in to help the business in April. However, the other candidate is not Superdry and former Co-op boss Euan Sutherland, who had been widely tipped for the job.
Debenhams is thought to want the £50m cash buffer to help it trade through Christmas. It could fund a wave of price cuts as the retailer fights for market share in a tough market, according to Sky News, which first reported the fundraising bid.
Slower demand for homewares and clothing, driven by low consumer confidence and rising competition online, has combined with higher costs to make life difficult for department stores. House of Fraser, which was bought out of administration by Mike Ashley’s Sports Direct group nearly a year ago, is set to close stores, as are big clothing chains including Arcadia’s Topshop, Miss Selfridge and Evans.
Ashley’s Sports Direct lost a bid to win control of Debenhams after investing £150m in the group’s shares, and has fired off a legal challenge against the Debenhams rescue restructuring.
The legal challenge is also being supported by a Salford-based landlord owned by the family of property investor Aubrey Weis, which owns six Debenhams properties. Debenhams has already settled a separate challenge from M&G, another landlord.
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