Debenhams to raise £323m in share sale

The retailer said it would raise the money via a placing and open offer of new shares. It is selling 40 per cent of the stock in a firm placing and the remaining 60 per cent will be offered to the market today.

According to reports, the fundraising is set to be priced below Wednesday's closing price of 92.25p but above 75p.

The stakes held by Debenhams' private equity backers TPG and CVC would fall below the level that would grant them board seats following the rights issue. Both TPG and CVC have voted in favour of the placing. The representatives from each firm on the retailer's board have resigned.

Debenhams, which has more than £900m in debt, has also negotiated for a relaxation of the terms of its main £950m loan agreements due in April 2011. It will use £50m of the share sale to repay part of a £150m loan payment due in May 2010.

Chief executive Rob Templeman said: "I believe that our trading for the year to date is a robust performance given the challenging nature of the market.The proposed capital raising together with the cash generation of this business will substantially reduce the group's net debt position and it gives us operational and financial flexibility for the future."

Pre-tax profits at the retailer in the 12 weeks to May 23 were ahead of last year, although like-for-like sales fell 0.8 per cent. Gross margin improved by 90 basis points.