Debenhams struggles to lure investors

Shareholders largely turned their backs on the cash call from Debenhams this week, with less than a third of the offer taken up.

The department stores group announced this month that it was to raise £323m. It plans to use the proceeds to pay down its debts, and could use some of the proceeds to fund potential acquisition. The offer closed on Monday.

Debenhams said in a statement to the market yesterday that 73.3 million of the possible 241.4 million new shares offered to existing shareholders had been accepted.

The total represented about 30.3 per cent of the fundraising drive. The remaining 69.7 per cent were placed by investment banks Citi and Merrill Lynch, which ran the fundraising, to institutional investors that were not existing shareholders in the group.

One Debenhams insider said the disappointing take-up by shareholders had been skewed by two of its largest backers declaring they would not take up their rights this month.

The private equity groups CVC Capital Partners and TPG, which own 24.5 per cent between them, said they would not participate and both took the opportunity to resign from the board. Other shareholders might not have invested considering the 13 per cent discount of 80p per share not high enough, the insider said.

Rob Templeman, the chief executive of Debenhams, said at the time of the fundraising announcement: "It removes leverage from the agenda and it will enable people to focus on our operating performance not the balance sheet performance.". The debts stood at £971m at the end of April.

The group, which has 144 stores in the UK and Ireland, believes that the debt burden has also weighed heavily on the group's share price since it listed in 2006.

TPG and CVC took the business private in 2003, before floating it three years later, loaded with £1bn debts.