Debenhams has completed a £650m refinancing ahead of schedule.

As a result, the department store group - which had flagged earlier this month that it would complete the refinancing early - has slashed interest costs net of fees from about 7% to about 4.5% in the first full year of the new credit facility, saving about £12m according to analysts.

The retailer was due to repay £520m - more than 90% of its debt - by May 2011 and the new facility will start in April 2011. The refinancing has resulted in an extension of the maturity on the debtto October 2013, with an option to extend it further to 2014.

The change is also likely to lead to the reinstatement of the retailer’s dividend next year.

Debenhams finance director Chris Woodhouse said: “The new facility puts Debenhams on a strong footing for the future, extending the group’s debt maturity horizon beyond three years and, in combination with related hedging, significantly reducing the group’s interest charge for the future.”

Debenhams has slashed its £1bn debt pile, to £511m by February this year. The £650m refinancing comprises a £250m term loan and a £400m revolving credit facility.

Panmure Gordon analyst Jean Roche said Debenhams’ shares “appear lowly rated”. However, Roche prefers rivals Marks & Spencer and Next, with the former “likely to have relatively more exposure to a better-off customer”.

Investec analyst Katharine Wynne said Debenhams will benefit from “some consumer recovery in the trading year”.

She added that the group is being “harshly rated by the market”,