The adviser will consider an equity raising, covenant waiver and renegotiating the maturity of the debt beyond the existing 2011 repayment deadline.
Earlier this month, Debenhams chief executive Rob Templeman said the chain, which has£900m of debt, has the funds in the bank to make a£100m debt repayment due in April. However, the retailer is understood to be keen to remove concerns that it could in future breach its banking covenants, according to the Financial Times.
Concerns over banking covenants have knocked Debenhams’ share price, despite the department store chain reporting a healthier Christmas period than some other retailers. If Debenhams breached its covenants it would vastly increase the cost of its debt.
In a note yesterday, JP Morgan analyst Richard Chamberlain said: “We think that Debenhams is managing its business very well during the downturn and that it has the right strategy of driving free cash flow.”
He added that Debenhams could expect a jump in interest rates after the current debt deal expires in 2011, although credit markets may improve to allow the retailer to refinance its debt.
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