Sports Direct’s £150m (€175m) rescue offer for Debenhams has been rejected, putting the high street retailer on course for a probable administration.
The last-minute rescue package promised to underwrite a £150m rights issue, on the condition that Mike Ashley be made chief executive of Debenhams.
In a statement yesterday, Sports Direct said its proposal had been rebuffed and called for the Debenhams board and its lenders to actively engage in negotiations to save the chain.
Mr Ashley was previously given a deadline of 5pm on Monday to fulfil one of two conditions to prevent Debenhams from falling into the hands of lenders.
If neither is fulfilled, the retailer is likely to go into a pre-pack administration, wiping out Sports Direct’s stake and all other shareholders.
Over the weekend, Mr Ashley tore into Debenhams executives, calling on Sunday for the board of the struggling high street chain to be investigated, for two members to take lie detector tests, and for trading in its shares to be suspended.
As well as accusing Debenhams bosses of “a sustained programme of falsehoods and denials”, he added that “misrepresentations were made to induce Sports Direct into signing a non-disclosure agreement, locking them out of any ability to trade in the bonds or equity of Debenhams for a period of time”.
Sports Direct called for Debenhams interim chairman Terry Duddy and non-executive director David Adams to take their own lie detector tests to “clarify their recollection of this meeting”.
Mr Ashley has a near-30% stake in Debenhams but faces wipeout if it goes ahead with a £200m refinancing plan.
Under the proposal, £101m is to be drawn down immediately to allow restructuring, which will include store closures and rent reductions.
The other £99m would have been made available if Sports Direct — or any other shareholder with a stake of more than 25% — fulfilled one of two conditions by April 8.
One option allowed Mr Ashley to make a takeover offer which included arrangements to refinance the group’s debt.
Alternatively, he had to call off an emergency meeting he requested to install himself on the retailer’s board and commit to either providing funding for the business or underwriting the issue of new shares.
The Newcastle United owner made the now-rejected offer on Friday, saying it would form part of a “comprehensive refinancing” of Debenhams and would be contingent on the retailer’s lenders agreeing to write off £148m of debt.