Uncertainty for King's Lynn workers as Debenhams rejects rescue bid

Roman Schwartz
April 10, 2019

"Mr Ashley's appointment would immediately relieve any pressure on the company's supply chain and he would be in a position to lead the restructuring of the company's stores and operations", BBC quoted Sports Direct as telling Debenhams in a letter.

FILE PHOTO: FILE PHOTO: Mike Ashley, founder and majority shareholder of sportswear retailer Sports Direct, leads journalists on a factory tour after the company's AGM, at the company's headquarters in Shirebrook, Britain, September 7, 2016.

The last-minute rescue package promised to underwrite a £150 million rights issue, on the condition that Mike Ashley be made chief executive of Debenhams.

These are: that he withdraws his request for a clear-out of the board; stops making damaging public statements about the company; agrees to a joint news release with Debenhams and its lenders; and provides a legal guarantee that promised funds will come through.

The billionaire said he has until 22 April to say whether he intends to buy the company, and that the cash buyout and the equity swap are alternatives that could not both happen.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "In theory a deal could be struck, but relations seem far from cordial, and the Debenhams management look set on giving the lenders control of the high street chain".

Sports Direct has previously indicated it may make a bid to take full control of Debenhams, of which it is already the biggest shareholder.

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Yesterday the tussle between the two retailers took a weird turn as Ashley continued to fight to stop the department store from entering into a pre-pack administration.

However, the deal was thrown into doubt at the weekend after Mr Ashley, who also owns Newcastle United Football Club, launched a stinging attack on Debenhams bosses, including a suggestion they should take lie detector tests.

Mr Ashley has a near-30% stake in the department store but faces wipeout if it presses ahead with a £200 million refinancing plan announced in March.

If it can not agree a rescue deal its lenders will take control of the company later on Monday.

But this afternoon the retailer confirmed it had rejected the proposal by Ashley's firm to underwrite a £150m equity issuance to help prop up the struggling chain.

However if Mr Ashley's proposals continue to be rebuffed the retail giant is likely to go into administration by the end of this week, with lenders seizing control.

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