Debenhams launches investor cash-call

Debenhams today launched an investor cash-call for around £323 million as it looks to reduce its debt mountain.

The retailer, which had debts of £927.2 million at the end of February, said it would use the funds to pay off some money, renegotiate with lenders and take advantage of retail deals in the recession.

Debenhams, which has 144 stores in the UK and Ireland, also reported that its like-for-like sales excluding VAT had dropped 0.8 per cent in the 12 weeks to May 23.

Shares fell 6 per cent as investors digested news of the chain's fundraising move.

Debenhams admitted its share price had been knocked in recent years by its level of indebtedness, but said it had confidence in the potential of the group.

It also said the banking crisis and tightening of the credit markets had led the firm to "consider Debenhams' options" on its structure and potential for refinancing in the future.

Matthew McEachran, an analyst at Singer Capital Markets, said the share placing was "clearly a positive" and would give the group extra cash for mergers or acquisitions in the downturn.

Debenhams' trading performance showed that while comparable sales were down, total sales rose 3 per cent and the group said it was continuing to gain market share and grow margins.

It added stores had seen a particularly strong performance from its own brand Designers at Debenhams range - including clothing by Ted Baker, Betty Jackson and John Rocha.

Rob Templeman, Debenhams chief executive, said: "We are looking forward to the introduction of a number of exciting new own-bought and Designer ranges throughout the store at the end of the summer including Matthew Williamson's exclusive new womenswear collection.

"Although the outlook for consumer confidence for the remainder of the financial year is uncertain, given the performance of the business so far this year, at this time the board remains confident in the trading strategy and the outturn for the full year."

As well as its department stores, the business also operates 10 Desire at Debenhams - which are small stores selling womenswear, cosmetics and childrenswear - as well as 50 international franchises in 17 countries.