Debt reprieve for Debenhams

Department store group Debenhams has gained some breathing space over repaying its £1bn (€1.39bn) debt burden, it was reported today.

The chain, which has several outlets in Ireland, has managed to renegotiate the terms of its debts with lenders to give itself longer to pay off the borrowings, the Sunday Telegraph newspaper said.

The retailer - said to be paying more than £5m (€6.9m) a month in interest - needed the extra leeway in a difficult trading environment to head off the risk of breaking some of its banking covenants, according to the report.

Debenhams was floated on the stock market 18 months ago - netting big profits for a private equity consortium of CVC, TPG and Merrill Lynch, which took the group private in December 2003.

The period of ownership massively increased the group's debt burden, which made the group less attractive to institutional investors on its return to the stock market. Shares have now fallen below £1 - less than half the level of May 2006.

But recent trading from Debenhams has been more encouraging after like-for-like sales fell 5% and operating profits slipped 18.5% to £194.1m (€269.15m) in the year to September.

As well as a review of its ranges, Debenhams has accelerated its store refurbishment programme and sought to improve its supply chain in a bid to revive the business.

The group, which was unavailable for comment on the report, has 135 department stores in the UK and Ireland, as well as nine 'Desire by Debenhams' stores, which offer a small store concept featuring a mix of womenswear, accessories, lingerie, cosmetics and childrenswear.