Sports Direct offers Debenhams last-minute £150m lifeline

In a letter to the Debenhams board sent on 5 April – just days before Sports Direct’s 8 April deadline to make a formal bid – Ashley offered to underwrite a £150m rights issue to save the business from a pre-pack administration. 

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 and Debenhams’ lenders agreeing to write off (in aggregate) £148m of Debenhams debt.

“Sports Direct also wishes to confirm that, in addition to consideration of the equity issuance, it continues to give active consideration to its pre-conditional possible offer for Debenhams at 5p in cash per ordinary share announced on 25 March 2019 (the ’possible offer’). 

“Sports Direct has until 5pm on 22 April 2019 to announce either a firm intention to make an offer for Debenhams or that it does not intend to make an offer.

”While Sports Direct continues to actively evaluate all possible options to support Debenhams, it wishes to clarify that, as a technical matter, were it to complete, the equity issuance would be an alternative transaction to the ’possible offer’ and vice versa.”

Meanwhile, Ashley has demanded that Debenhams chairman Terry Duddy and non-executive director David Adams take a lie detector test, the Mail on Sunday has reported. 

He requested they do the test after commissioning his own lie detector test to prove he was telling the truth about the details of a meeting with Debenhams’ board members. 

Debenhams has declined to comment. 

It comes after Debenhams agreed a £200m refinancing deal with its existing lenders. The struggling department store chain received the first facility of £101m last week. The remaining £99m is conditional on Sports Direct – which owns 29% of Debenhams – or another major (25%-plus) shareholder making a “firm and binding offer” for the retailer, which must include an agreement to refinance its £560m group debt.

Alternatively, Sports Direct could provide funding for Debenhams in the form of equity or a loan known as a “subordinated debt instrument”, and cancel its request for an extraordinary general meeting (EGM) to appoint Ashley as CEO of the department store.