Debenhams raising flops

HIGHSTREET retailer Debenhams yesterday said its shareholders had taken up just a third of its share offering in a £323m fundraising.

The department store chain launched the cash call earlier this month to achieve chief executive Rob Templeman’s aim of taking its £900m debt mountain “off the agenda”.

Britain’s second largest high-street retailer said 73,388,851 shares, around 30.3 per cent, had been accepted by current shareholders.

The remaining shares were sold to other investors at 80p per share, a 13.3 per cent discount to the closing price the day before the placing.

Since then, Debenhams stock has fallen below the offer price.

CVC, one of the group’s private equity backers, took the opportunity of the cash call to sell a tranche of shares, taking its nine per cent holding down to just 2.7 per cent.

Only TPG remains as a big shareholder and its stake, which was 12.8 per cent, will be diluted to nine per cent following the fundraising. A third investor, Merrill Lynch, sold out last year.

TPG and CVC floated the business on the stock exchange after taking it private in 2003 and saddling it with £1bn in debts.

When the group was floated in 2006, it was valued at around £1.8bn. Since then, the group has dropped in value to £794.54m.

Shareholders yesterday voted in favour of the capital raising at an extraordinary general meeting.

Debenhams and key investors felt that the debt issue was weighing on the real value of the company.

Yesterday the group’s shares lifted by two per cent to 74.5p.

SIMON MACKENZIE SMITH
MERRILL LYNCH
DEBENHAMS appointed Lazard in January this year to sound out fundraising options, alerting markets to a potential cash call.

City brokers Merrill Lynch and Citigroup, who worked on Debenham’s initial public offering in 2006 also advised the retailer on the £323m share placing.

Simon Mackenzie-Smith and Simon Fraser led the Merrill Lynch team.

Michael Lavelle headed the Citigroup team, with Andrew Seaton and Jan Skarbek. Lavelle, head of European capital markets, has spent over a decade with Citigroup, transferring from Schroders in 1999, along with Skarbeck. Seaton joined Citigroup from Credit Suisse.

Seaton told City PM earlier this month that the advisers “had no anticipation three or four years ago that Debenhams would have to do a fundraising. But credit markets have changed, the amount of debt loaded on for the IPO hasn’t been paid down, the recession has dragged down the retail sector and there has been a few own goals on the company’s part.”