Boohoo and Debenhams Parent Company Launches £35 Million Shareholder Fundraising
The owner of popular fashion brands Boohoo and Debenhams has announced plans to raise £35 million from its shareholders in a strategic move aimed at strengthening its financial position. This initiative comes amid speculation of a potential clash with Sports Direct founder Mike Ashley, who holds a significant stake in the company.
Turnaround Strategy and Financial Objectives
According to a statement released by the firm, the new capital injection is intended to help reduce existing debts and support comprehensive turnaround plans. These plans include implementing cost-cutting measures, selling a distribution centre, and transforming Debenhams into an online marketplace that hosts other major brand names.
The fundraising effort, which is backed by Boohoo founder Mahmud Kamani, follows a previous £39 million shareholder raise less than 18 months ago. The company is actively working to boost sales in a highly competitive retail environment, facing stiff competition from rivals such as Shein and Vinted.
Market Reaction and Analyst Insights
Debenhams experienced a share price decline of nearly nine per cent this morning, reflecting market uncertainty. Independent retail analyst Nick Bubb commented to the Guardian, expressing concern that investors may be dismayed by the group's current financial situation.
Investment bank Peel Hunt noted that Debenhams was approaching covenant limits on a three-year £175 million debt facility. Despite these challenges, the company has reported that its brands are now trading profitably and remains on track to achieve underlying profits of £50 million for the year ending in February.
Shareholder Support and Potential Conflicts
The company stated that institutional shareholders have already shown support for £24 million of the fundraising. The shares are being offered at 20p each, representing an 11 per cent discount compared to Monday's closing price.
What remains uncertain is whether Mike Ashley's Frasers Group, which is Debenhams' largest shareholder, will support this call for additional funds. This potential disagreement adds an element of tension to the fundraising process.
In their official statement, the company emphasized: "The turnaround plan is going apace. The fourth quarter has continued to see material improvements in the group's sales trend, alongside the continued removal of significant cost from the business as it is simplified."
