Debenhams considers loan from Sports Direct amid escalating struggle
Besieged retailer Debenhams has said it will “carefully” consider a £ 150million loan proposal from Mike Ashley’s Sports Direct amid an escalation between the two.
Her response follows Sports Direct’s confirmation late Wednesday that she had made a loan offer to Debenhams as part of a deal that would install Mr Ashley as the company’s chief executive.
It came as Sports Direct also revealed on Wednesday that it had filed a complaint with the town’s watchdog about Debenhams’ communications.
In a letter written just days before Mr Ashley launched a coup attempt to take over Debenhams’ board of directors, Sports Direct challenged the retailer’s earnings statements, accusing the board of directors to give deceptive communications.
Debenhams called the complaints “unfounded and selfish”.
But in the latest twist in the ongoing saga, Debenhams has confirmed that he will consider the loan offered by Sports Direct.
The department store chain said such a loan would require support from current lenders and “significant modifications” to existing facilities.
He added: “Nonetheless, the board will carefully review the proposal and engage with Sports Direct and other stakeholders regarding its feasibility for the benefit of all parties.”
If approved, the loan would be interest-free, but without the issuance of shares, it would bear 3% interest.
The loan would see Debenhams use £ 40million to repay existing debt and the remaining £ 110million available for working capital.
This is the final stop in Mr. Ashley’s shopping spree on Main Street. Last year, the maverick businessman bought House of Fraser and Evans Cycles, and has previously been linked with offers for Patisserie Valerie and HMV.
But Debenhams has already rejected Sports Direct’s funding offers.
The Sports Direct letter shared with the media on Wednesday, which is dated March 4 – the day before Debenhams issued a profit warning to the market – claims that a previous January release was “incredibly bullish at best or at best. worse deliberately misleading ”.
In the trade statement in question, Debenhams said it was “currently on track” to meet market expectations.
Eight weeks later, the retailer warned that profits would be lower after a hit in sales in the 18 weeks leading up to Jan.5.
Sports Direct, which is the largest shareholder in Debenhams, received a copy of the earnings warning the day before it was published.
The company responded with the letter, which accused Debenhams of being “misleading” by saying in January that it was continuing to “generate cash”, despite ongoing discussions to refinance the company.
The letter was also shared with the Financial Conduct Authority (FCA), in a move that Sports Direct described as raising concerns.
Mr Ashley tabled a shareholder meeting proposal last Thursday to remove “all current members of the board of directors of Debenhams” except Chief Financial Officer Rachel Osborne.