Debenhams is expected to enter into a pre-pack administration today, after it rejected an increased £200m lifeline from Sports Direct.
In the early hours of this morning Sports Direct made a revised proposal to Debenhams, under which it would underwrite a £200m pre-emptive equity issuance to existing Debenhams shareholders. The retailer had offered a similar £150m deal yesterday, 8 March, which was Debenhams’ shareholders deadline.
However, Debenhams said the offer was “highly conditional” and that it was “not sufficient to justify an extension to the deadline.”
Debenhams said it is in discussions with its lenders, and it is likely to enter into a pre-pack administration, which would wipe out equity for shareholders, later today.
In a statement, Debenhams said: “The company is in discussions with its lenders regarding the availability of the remaining facilities that have not yet been drawn down. As announced on 29 March, and as a result of the milestones relating to a potential transaction with SDI not having been met, it is likely that these facilities will now only be available to the group’s subsidiaries upon transfer of those subsidiaries into the ownership of a lender-approved entity.
“This outcome would ensure the stability and continuing trading of the group’s operating subsidiaries, with no disruption to the group’s business, customers, employees, pension holders, suppliers or operations. This outcome would result in no equity value for the company’s current shareholders.”
Sports Direct said in a statement: “The Equity Issuance, which would form part of a comprehensive refinancing of Debenhams, is subject to a number of conditions, all of which Sports Direct believes should be deliverable with the co-operation of Debenhams and its existing lenders, including the appointment of Mr Mike Ashley as Debenhams’ CEO as soon as practicable and Debenhams’ lenders agreeing to write-off (in aggregate) £82m of Debenhams’ £720m total debt facilities.
“Sports Direct has informed the board of Debenhams that Sports Direct is available to discuss this at any time. Sports Direct also called upon the board of Debenhams to engage with Sports Direct to find a solvent solution for Debenhams, which is in the best interests of all of Debenhams stakeholders.”