Ashley faces £100m ultimatum over Debenhams
DEBENHAMS’ lenders have told Mike Ashley to support a rights issue, or make a firm takeover bid for the embattled department store or face being wiped out.
The company has snubbed the Sports Direct tycoon’s previous efforts to seize control, including a recent £61m takeover approach, because it said the offer did not solve the group’s “immediate working capital needs”.
Instead, Debenhams has gone ahead with a £200m refinancing that could be the first step in handing the 206-year-old retailer to a group of hedge funds.
Sports Direct, which had said its 5p-a-share takeover approach depended on Debenhams scrapping its refinancing deal, said it would now give “further consideration” to its approach after the department store won support from its lenders.
However, Debenhams revealed that £99m of the refinancing is conditional on Sports Direct either making a “firm and binding offer”, including satisfactory arrangements to refinance its £560m debt by April 8, or for Sports Direct to underwrite a rights issue or provide funding to Debenhams.
It said that if Sports Direct did neither, the money would only be available once transferred “into the ownership of a lender-approved entity” – resulting in “no equity value for the company’s shareholders”. It is understood that this would take the form of a prepack administration to the bondholders. Sources said it was an attempt to bring the saga to a swift conclusion.
Terry Duddy, Debenhams chairman, said the retailer had “preserved a route for our shareholders to participate in the future of the business, but this requires the support of our major shareholder”.
Mr Ashley lashed out at Debenhams’ advisers yesterday as it emerged HSBC, one of its long-standing banks, was not involved in the refinancing. “If there were any justice in the world, the majority of the advisers would be put in prison’” he said in a statement.
FTI Consulting has been working with Debenhams’ bondholders, while Lazard and KPMG have been advising Debenhams.