On the go: Trustees of the Debenhams pension schemes have welcomed the news that its sponsor has agreed a £200m refinancing of its debt, including packages to improve the security of member benefits.
The high-street giant announced on Thursday that it had secured the backing of a majority of creditors for restructuring, before confirming on Friday that two credit facilities worth £200m have been agreed.
The first £101m facility will be drawn down immediately to pay off interim borrowing and prop up the retailer. The remaining £99m will be available if Sports Direct comes to the company’s rescue.
Mike Ashley’s sporting retailer is a major shareholder in Debenhams, and made an offer for the remaining shares it does not own earlier this week. That offer did not fulfil Debenhams’ working capital requirements and would have seen it cease trading, according to the company.
If Sport Direct does not make an offer that satisfies the company's existing lenders, the £99m “would be available to the group’s subsidiaries only upon transfer of those subsidiaries into the ownership of a lender-approved entity”.
Importantly, while this deal would wipe out shareholders in the business, it would also provide a future for the company and for its pension schemes.
“Following discussions between the company, the trustees of the Debenhams pension schemes and key pensions stakeholders, agreement has been reached with the trustees to provide enhanced support to the schemes, including increased contributions and enhanced security,” the announcement said.
A spokesman for the Debenhams schemes said: “We welcome the agreement announced today. Members can be reassured that the schemes will continue to operate as normal.
“We hope that the agreement will form the basis of a sustainable solution for the trading business that ensures it will continue to support the pension schemes on a long-term basis.
“The trustees have worked with our specialist advisers throughout the discussions to ensure that members’ interests are taken into account, and we have consulted closely with the Pensions Regulator and the Pension Protection Fund at every stage,” the spokesman added.
“We are in the process of writing to all members with further information, and we will continue to keep them informed.”
Debenhams’ two schemes are in surplus on the IAS19 funding basis prescribed for company accounts. However, technical provisions and buyout liabilities, the costs of funding the scheme for employers and insuring the scheme, respectively, are usually significantly higher.
