Control of Debenhams has fallen into the hands of its lenders as part of a pre-pack administration process.
Debenhams has 166 stores, which will initially continue to trade, although about 50 branches had already been earmarked for closure in the future.
The department store rejected last-ditch rescue offers from Mike Ashley’s Sports Direct, which has been locked in an acrimonious battle for control.
Its lenders are made up of High Street banks and US hedge funds.
These include Barclays and Bank of Ireland, as well as Silver Point and GoldenTree.
The administrators said: “The transaction included provisions to ensure that the Group is immediately marketed for onward sale.”
What happens now?
A pre-pack administration lets a company sell itself, or its assets, as a going concern, without affecting the operation of the business. Administrators take over the running of the business to protect creditors and shareholders lose their investments.
It means that Mr Ashley’s near 30% stake in the company, which cost about £150m to build up, will be wiped out.
Debenhams employs about 25,000 people. As well as the planned closures, it has also been renegotiating rents with landlords to tackle its funding problems.
It has not released a list of which shops may be shut.
In February, it was revealed that the closure of 20 of those stores could be brought forward if the retailer took out a company voluntary arrangement (CVA), a form of insolvency that can enable firms to seek rent cuts and close unwanted stores.
Why is Debenhams in trouble?
Debenhams has been struggling for a while and issued three profit warnings in 2018. It also has a debt pile of £622m.
Last year, it reported a record pre-tax loss of £491.5m and later reported that its sales had fallen sharply over Christmas.
The company floated on the stock market in 2006 with a share price of £1.95, and its share price peaked at £2.07 the following day.
Its highest pre-tax profit since then was £160.3m in 2011, but last year it lost £491.5m.
On Monday, it rejected a £150m rescue offer from Mike Ashley’s Sports Direct, which was increased to £200m in the early hours of Tuesday.
The higher offer was rejected because Mr Ashley wanted to be chief executive.
What do the experts say?
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “As an investment, Debenhams is a tale of woe from start to finish.
“The strategy since float was out of kilter with the changing habits of consumers. But even before the float, its private equity owners had put the department store under financial pressure, by selling off a number of freeholds in favour of leasing them back.
“Hindsight is a wonderful thing, but the road to Debenhams’ ruin has been paved with poor decisions, as well as a dramatic shift towards digital shopping.”
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