British multinational retailer Debenhams has entered an agreement in principle with Li & Fung, a global supply chain solutions partner for consumer brands and retailers, to develop a strategic sourcing partnership. This agreement is expected to cover a material part of its own-brand sourcing over time and will deliver benefits for both its customers and stakeholders, through improved product quality and lead-times; higher achieved margins; and better working capital efficiency, says the company. Initial orders under the agreement are expected to commence shortly.
This comes as the retailer looks to keep the company on a stable footing for a sustainable and profitable future. “The company has agreed an additional 12-month senior secured credit facility certain of its current Revolving Credit Facility RCF lenders and Noteholders, together with the waiver and amendment of certain RCF covenants,” says Debenhams.
This additional facility fully utilises permissions within the terms of the current RCF and the Notes and provides GB£40m of increased liquidity headroom, available to draw as required. The facility will initially pay interest of Libor +5% cash coupon per annum and will be secured over the assets of the existing guarantors of the RCF and the Notes.
The new facility agreement, which contains provisions for a step-up in pricing during Q2 of this year, will act as a bridge to facilitate a broader refinancing and recapitalisation. “In this context, we are continuing to engage constructively with our stakeholders, and intend to conclude a comprehensive refinancing by the end of this period,” continues Debenhams. “A further update will be provided in due course.”
In the meantime, the company is continuing to make operational improvements to support the business turnaround under the Redesigned strategy.
Sergio Bucher, CEO, Debenhams, says that the Li & Fung announcement, “represents the first step in our refinancing process. The support of our lenders for our turnaround plan is important to underpin a comprehensive solution that will take account of the interests of all stakeholders and deliver a sustainable and profitable future for Debenhams.
"In addition, the partnership agreement we are announcing with Li & Fung will be a key part of our turnaround plan. It gives us access to state-of-the-art technology in the LF Digital platform, providing end-to-end visibility across our supply chain. This will help us anticipate and respond more quickly to trends and our customers' preferences, as well as delivering a better-quality product."
