Debenhams shares at record low

Jun 24 2008 by Iain Laing, The Journal

DEPARTMENT store chain Debenhams saw shares hit a record low yesterday amid fresh City fears over the group’s financial health in a tougher retail climate.

The company’s shares slipped 10% to 39p at one stage, valuing it at £335m, after an 18% fall on Friday amid analyst concerns that Debenhams could breach banking covenants and cut its dividend to save cash.

This is a just a fifth of the 195p price at which Debenhams was refloated on the stock market in May 2006, when private equity firms who took the group private in December 2003 secured big profits.

Seymour Pierce’s Freddie George said: “There is no doubt in light of weaker trading in recent weeks that the company will come close to breaching its covenants.

“We also expect the company to cut its dividend at the year end to preserve cashflow.”

Weekend reports had also suggested that Debenhams had extended payment terms to its suppliers to 96 days to ease the pressure on the business.

A spokesman refused to comment on the terms of its banking covenants but denied the renegotiation with its suppliers, saying: “Supply terms have not been pushed out.”

Debenhams’ recent private ownership was controversial because the consortium heavily increased the company’s debt burden, making the group less attractive to institutional investors on its stock market return.

Latest accounts for the six months to March showed net debt of £979.3m.