Debenhams has secured a lifeline from its lenders as the department store chain seeks a broader refinancing deal amid long-term pressures on the high street.
The retailer has confirmed an agreement with current lenders and noteholders to extend its borrowing facilities by a year with a cash injection of £40m.
It will act as a bridge while the company continues talks for a longer-term refinancing.
Chief executive Sergio Bucher said: “Today’s announcement represents the first step in our refinancing process.
“The support of our lenders for our turnaround plan is important to underpin a comprehensive solution that will take account of the interests of all stakeholders, and deliver a sustainable and profitable future for Debenhams.”
Shares in the company rose as much as 48.5% to 4.658p in early trading on Tuesday.
The announcement ends months of uncertainty over the company’s finances, which led to Sports Direct boss and Debenhams shareholder Mike Ashley saying the firm had little chance of survival.
Ashley’s offer of a £40m loan was turned down on the basis that his terms would affect other shareholders.
Separately, Debenhams announced on Tuesday that it has reached an agreement with supply chain manager Li & Fung to oversee some of the chain’s sourcing. The Hong Kong-listed firm was described by Mr Bucher as being a “key part” of the Debenhams turnaround plan.
“It gives us access to state-of-the-art technology in the LF Digital platform, providing end-to-end visibility across our supply chain. This will help us anticipate and respond more quickly to trends and our customers’ preferences, as well as delivering better quality product,” he said.
Debenhams is also working with advisers at KPMG on restructuring options thought to include a company voluntary arrangement (CVA), though plans have been kept tightly under wraps.
Neil Wilson, chief market analyst at Markets.com, said the refinancing would help management to navigate tough times ahead.
“Disposals, especially Magasin in Denmark, are certainly on the cards, as well as store closures in the UK,” he said.
“It would appear this extra facility will cover the rent payment due (at) the end of March, but we also need to see progress on a proposed CVA to deliver an accelerated store closure programme.”