Debenhams has secured a cash injection of £40m, giving it more time to arrange a longer-term refinancing and store closure plan.

The ailing department store chain, which has 165 outlets and employs 25,000 people, has been battling to reach a deal with its banks and bondholders after a difficult Christmas capped off a lacklustre 2018, during which it issued three profit warnings.

Sergio Bucher, the chief executive, hailed the new 12-month credit facility as a “first step in our refinancing process”.

“The support of our lenders for our turnaround plan is important to underpin a comprehensive solution that will take account of the interests of all stakeholders, and deliver a sustainable and profitable future for Debenhams.”

Debenhams said it would continue talking to its lenders about a comprehensive refinancing. The rescue process is expected to involve the closure of tens of stores and lenders taking a stake in the company.

News of the cash injection saw Debenhams’ shares jump 30%, to just over 4p.

The firm also announced a new sourcing partnership with Li & Fung, a Hong Kong-based supply chain manager. Bucher said this would be key part of the company’s turnaround plan, giving it access to state-of-the-art technology in the LF digital platform, enabling it to respond more quickly to trends and customers’ preferences.

The company previously had £520m in debt facilities in place including £320m of loans and £200m of bonds, which are due to be repaid next year. Without the short-term overdraft extension, it risked breaching the terms on its debt when it faces a test on its financial health at the end of February.

Last month Debenhams said it had net debt of £286m. Cashflow has been squeezed as suppliers concerned about the financial health of the company are demanding more up-front payments.

The retailer has been sounding out property advisory firms about organising the rapid closure of as many as 50 stores via an insolvency procedure known as a company voluntary arrangement (CVA).

Such a route has already been taken by other struggling high street chains including New Look, Mothercare and Carpetright as the whole industry struggles with a combination of rising costs, falling sales and the switch to internet shopping. CVAs can take several weeks to arrange and it is not clear if a deal can be put in place before Debenhams’ quarterly rent day in late March, when it will have to pay out about £50m to landlords.

The ultimate plan to refinance its debt is likely to include a debt for equity swap but might also involve new cash from Mike Ashley’s Sports Direct, which owns close to 30% of the company. In order to facilitate his possible involvement in a deal, Ashley is understood to have been given access to limited information about the store chain after signing a non-disclosure agreement.

Before Christmas, Sports Direct offered the department store a £40m loan but the company turned it down because it came with a demand for security over some of Debenhams’ assets that would have given Ashley’s company a preferential position over other shareholders.

Sports Direct demanded the right to add another 10% to its shareholding without making a formal takeover bid for the whole company. Under Takeover Panel rules anyone with more more than 29.9% must make a bid for the whole company. Debenhams feared such an agreement would give Ashley control of the company on the cheap.

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The credit agency Moody’s cut its view on Debenhams to negative last month, saying the company would struggle to refinance its debts without raising new funds. The company had put on hold plans to raise cash by selling its Danish Magasin du Nord chain after failing to receive strong enough offers. After weak sales and pressure on profit margins over Christmas, Moody’s said it expected Debenhams’ underlying profits to fall by up to £20m this year, having previously predicted they would be similar to last year.

Pressure on the company ramped up in January when its then chairman, Sir Ian Cheshire, and chief executive, Sergio Bucher, were ousted from the boardroom by Ashley’s Sports Direct and the Dubai-based retail billionaire Micky Jagtiani’s Milestone Resources, which voted against them at its annual shareholder meeting.

Cheshire stepped down immediately and was replaced by the interim chairman, Terry Duddy, the former chief executive of Home Retail Group. Bucher has stayed on but is no longer a director.