Karli Edmondson
Posted: Thursday, July 22, 2010 11:46 am

Debenhams has completed its £650m refinancing deal ahead of schedule. Analysts are predicting that the move could lead to the firm paying dividends again from next year.

The new deal, which will start in April 2011 when its existing facility expires, would compromise a £250m loan and £400m revolving credit facility. 

Finance director Chris Woodhouse said: "Debenhams continues to be a highly cash generative and profitable business and we expect to continue our programme of net debt reduction over the coming years."

Oriel Securities analyst Eithne O'Leary said: "Having weathered the financial crisis well, Debenhams has refinanced its debt facilities well in advance of the April 2011 deadline. Encouragingly the facilities are a £250m term loan and a £400m revolving credit facility, well less that the £1bn of debt that Debenhams entered the credit crisis with. The cost of this debt is expected to reduce from 7% to around 4.5% in the first full year of the facility, and allows us to upgrade our August 2012 forecasts by £5m or 2.7%."

"This should remove financing worries from the agenda and more importantly clear the way for the recommencement of dividend payments from the interim stage in 2011. Debenhams continues to transform the business into a design led, own bought business that adds sensibly priced and interested acquisitions. With the shares trading on just 7.3x August 2010 earnings, we believe they offer good value to 125p and with a rapidly improving risk profile, we re-iterate our buy recommendation."