Freshfields wins lead role on Debenhams recapitalisation

Freshfields Bruckhaus Deringer

has confirmed its position as lead adviser to Debenhams with a major role on the company’s £2bn refinancing.

A Freshfields team led by finance partner Brian Gray and corporate partners Patrick Gaynor and Karen Fountain have been advising on a complex recapitalisation of the high street giant with a view to a flotation.

Gray said: “The documentation broke new ground in terms of embedding sufficient flexibility to survive a public offering.” Freshfields edged out Ashurst as Debenhams’ lead corporate adviser following a contested auction in 2003. Freshfields corporate partners Patrick Gaynor and Ed Braham advised the Baroness Retail consortium, consisting of CVC, Texas Pacific Group and Merrill Lynch Private Equity to outbid Permira in a £1.9bn leveraged buyout. The recap is expected to return £800m to the private equity investors.

The banks – Credit Suisse First Boston, Merrill Lynch, Morgan Stanley and Citigroup – are being advised by Shearman & Sterling partner Clifford Atkins.

Underlining the increased liquidity in the senior debt market, the new loan facilities have involved a redemption of the high-yield debt. Atkins said: “If you’re looking for an IPO, you don’t want any piece of debt where there are prepayment premiums.”

The senior debt also includes a second lien, but that tranche is understood to have been less popular with investors. There have already been reports that fees to the underwriting syndicate have been increased by 50 basis points to encourage take-up.

Gray said: “This transaction may have set the high water mark of ambition for standalone second liens; market chatter indicates that large amounts of finely priced second lien might now be hard to come by without more junior debt appearing in the structure.”