Debenhams raising flops

HIGHSTREET retailer Debenhams yesterday said its shareholders had taken up just a third of its share offering in a &pound;323m fundraising.<br /><br />The department store chain launched the cash call earlier this month to achieve chief executive Rob Templeman&rsquo;s aim of taking its &pound;900m debt mountain &ldquo;off the agenda&rdquo;.<br /><br />Britain&rsquo;s second largest high-street retailer said 73,388,851 shares, around 30.3 per cent, had been accepted by current shareholders. <br /><br />The remaining shares were sold to other investors at 80p per share, a 13.3 per cent discount to the closing price the day before the placing.<br /><br />Since then, Debenhams stock has fallen below the offer price. <br /><br />CVC, one of the group&rsquo;s private equity backers, took the opportunity of the cash call to sell a tranche of shares, taking its nine per cent holding down to just 2.7 per cent. <br /><br />Only TPG remains as a big shareholder and its stake, which was 12.8 per cent, will be diluted to nine per cent following the fundraising. A third investor, Merrill Lynch, sold out last year.<br /><br />TPG and CVC floated the business on the stock exchange after taking it private in 2003 and saddling it with &pound;1bn in debts.<br /><br />When the group was floated in 2006, it was valued at around &pound;1.8bn. Since then, the group has dropped in value to &pound;794.54m. <br /><br />Shareholders yesterday voted in favour of the capital raising at an extraordinary general meeting. <br /><br />Debenhams and key investors felt that the debt issue was weighing on the real value of the company.<br /><br />Yesterday the group&rsquo;s shares lifted by two per cent to 74.5p.<br /><br /><strong>SIMON MACKENZIE SMITH<br />MERRILL LYNCH</strong><br />DEBENHAMS appointed Lazard in January this year to sound out fundraising options, alerting markets to a potential cash call.<br /><br />City brokers Merrill Lynch and Citigroup, who worked on Debenham&rsquo;s initial public offering in 2006 also advised the retailer on the &pound;323m share placing.<br /><br />Simon Mackenzie-Smith and Simon Fraser led the Merrill Lynch team.<br /><br />Michael Lavelle headed the Citigroup team, with Andrew Seaton and Jan Skarbek. Lavelle, head of European capital markets, has spent over a decade with Citigroup, transferring from Schroders in 1999, along with Skarbeck. Seaton joined Citigroup from Credit Suisse.<br /><br />Seaton told City A.M. earlier this month that the advisers &ldquo;had no anticipation three or four years ago that Debenhams would have to do a fundraising. But credit markets have changed, the amount of debt loaded on for the IPO hasn&rsquo;t been paid down, the recession has dragged down the retail sector and there has been a few own goals on the company&rsquo;s part.&rdquo;