Sunday 18 August 2019

Debenhams move challenges Ashley: put up or lose out


Sports Direct chief Mike Ashley
Sports Direct chief Mike Ashley

Katie Linsell

Debenhams is edging closer to giving lenders control in a move that would thwart efforts by largest shareholder Mike Ashley to take the reins.

The struggling UK retailer is preparing a so-called pre-packaged administration because billionaire Ashley's Sports Direct International has not yet agreed to the lenders' terms.

Sports Direct has until Monday to meet their requirements or risk losing its entire 30pc stake.

Lenders are locked in a battle with Ashley as the company seeks to restructure about £720m (€834m) of debt. Debenhams has demanded Ashley make a "firm and binding" offer for the company after having rejected all of his previous proposals, including two attempts to extend loans, an offer to buy the company's Danish stores and a possible purchase of Debenhams equity.

"Ashley has been backed into a corner," said Neill Keaney, an analyst at CreditSights in London. "He tried to buy the company on the cheap and now, if he wants to get it, he's being forced to pay up. Ashley has done everything short of putting his money where his mouth is and taking out his cheque book."

Pre-pack administration is typically a court-based process which can allow creditors to take control in a pre-agreed plan while the company continues to operate as normal. It does not require shareholder approval.

Debenhams gave Sports Direct an ultimatum on March 29 - commit to a restructuring on the lenders' terms or risk getting completely wiped out when they take control.

Lenders are withholding £99m (€114m) of funding until either of two conditions are met. Sports Direct has to make a serious offer which includes "satisfactory arrangements" to refinance debt and provides the company with sufficient working capital. Alternatively, it could cancel its request for a special shareholder meeting to name Ashley as Debenhams chief executive and underwrite a rights issue or provide a subordinated loan on lender-agreed terms.

Sports Direct responded yesterday, saying "a number" of Debenhams shareholders have expressed support for Ashley to be named CEO.


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