Sports Direct escalates Debenhams issues

Lloyd Doyle
Марта 16, 2019

The Sports Direct boss has made no secret of his desire to bring Debenhams closer together with House of Fraser, the department store he bought out of administration a year ago.

Today, Sports Direct revealed that it has made an alternative loan proposal to Debenhams, the troubled department store chain, as the latter was on the brink of securing funds to fend off the bid of Mike Ashley to take charge of the firm.

Sport Direct owns almost 30 percent of Debenhams.

If the 5% share issue was agreed, this would normally trigger full takeover proceedings, but Sports Direct wants a "whitewash" to be approved by Debenhams' independent shareholders, as it seems reluctant to go so far as this.

Debenhams said any third party loan offer on the terms offered would require both the consent of its existing lenders and bondholders as well as "material amendments" to existing facilities.

In a statement, Debenhams said that its board will give "careful consideration" to the proposal and will "engage with Sports Direct and other stakeholders regarding its feasibility in the interests of all parties".

If this was approved, the loan would be interest-free, but without the share issue it would bear 3% interest.

Mike Ashley had offered to make a £40m loan in return for an extra 10% stake in the company, giving Sports Direct a controlling stake - it now owns 28.7% of Debenhams.

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Debenhams branded the complaints "unfounded and self-serving".

The retail tycoon demanded a general meeting of shareholders to push out all but one of the existing board members and for him to take on an "executive role" in the struggling high street firm.

In the trading statement in question, Debenhams noted it was "currently on track" to meet market expectations.

Sports Direct's letter shared with media on Wednesday, which is dated March 4 - the day before Debenhams issued a profit warning to the market - claims that a previous trading statement in January was "at best impossibly optimistic or at worst deliberately misleading".

Eight weeks later, the retailer warned that its profits would be lower after a hit to sales in the 18 weeks to January 5.

The Sports Direct letter alleged that the update on 10 January was "quite clearly misleading" in saying "we continue to generate cash" given emergency funding of £40m was needed by Debenhams "a mere five weeks later".

Debenhams rejected a 40 million pound loan offer from Ashley in December.

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