Published: Sat, March 16, 2019
Finance | By Loren Pratt

Debenhams will consider Sports Direct loan offer

Debenhams will consider Sports Direct loan offer

Mike Ashley's Sports Direct has accused the Debenhams board of "deliberately misleading" the market as the retail tycoon continues to pile the pressure on the struggling high street firm.

Sports Direct, 61% owned by Mr Ashley, confirmed on Wednesday it had offered a loan to Debenhams as part of a deal which would make him chief executive.

Debenhams, which is thought to be looking at a larger refinancing and a Company Voluntary Arrangement that would involve the closure of stores and rent reductions across the rest of its estate, said that any third party loan offer on these terms would require both the consent of its current credit facility lenders and bond noteholders, as well as requiring material amendments to existing facilities. Articles appear on for a limited time.

But if the conditions were not approved, the loan would bear 3% interest. Sports Direct's proposed 5 percent extra stake in Debenhams would increasse its shareholding to around 35 percent.

Sports Direct set out its one-year loan proposal as an alternative to a £150m loan Debenhams that said this week it was negotiating to obtain from existing lenders as the department store chain battles for survival.

Sports Direct wrote to Debenhams directors before it warned on profit, saying comments made eight weeks earlier that cost savings were helping compensate for hard trading were "at best impossibly optimistic or at worst deliberately misleading", according to a report in the Financial Times.

Two days after the latest profit warning, Ashley took matters into his own hands with an audacious bid to axe most of Debenham's directors and appoint himself to the board.

Mash Holdings
Sports Direct founder Mike Ashley

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

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

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

Mr Ashley tabled a proposal last Thursday for a shareholder meeting to remove "all of the current members of the Debenhams board", other than finance chief Rachel Osborne.

The letter was also shared with the FCA, in a move Sports Direct described as putting its concerns on record.

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

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