Debenhams races to secure £150m debt as Ashley sits in the wings
DEBENHAMS is racing to overhaul its debt – possibly by the end of the month – despite an attempt by billionaire sportswear tycoon Mike Ashley to usurp control from the board of directors.
The beleaguered department store chain has been in talks with lenders on a plan to refinance £150 million of borrowing under new terms in a major step forward for the business.
The reorganisation is being led by acting chairman Terry Duddy, who previously ran Argos and Homebase owner Home Retail.
An attempt by Ashley to install himself as chief executive was swept aside last week by lenders. It is understood that Ashley failed to convince lenders he had a workable plan to turn the business around.
City sources said Ashley would also need to convince creditors and other investors that he could bring in a viable board to help him revitalise the business and keep it separate from Sports Direct’s House of Fraser acquisition.
One City executive told The Mail on Sunday that Ashley was ‘hopelessly conflicted’ despite his promise to step down as Sports Direct chief executive, while remaining its majority shareholder.
Another senior retail source said: ‘Ashley must think the bondholders and shareholders at this business were born yesterday if he thinks they are just going to step aside and hand him control for nothing. Where’s the money? Where’s the plan? Is it the same plan as the one for House of Fraser? Because at the moment that demonstrates nothing based on the state of those stores. Meanwhile, he’s trying to barge through the door at Deben- hams which has five times as many stores and tell everybody “leave it to me?” It would all be a great joke but no one is laughing because there are 25,000 jobs at stake here.’
Ashley’s abrasive style has made it difficult to draft in board directors in the past. But it is understood that lenders have not ruled out working with him and a key board role is not out of the question. Debenhams, which says it plans to close 50 stores, has rebuffed sev- eral efforts by Ashley to seize control of the business. Last summer, he approached former Debenhams chairman Sir Ian Cheshire with an offer to step in as chief executive – as revealed by The Mail on Sunday in January. He has also separately offered to take the chairman’s role.
He now wants to push ahead with his plans by calling for a shareholder vote – but that could take up to seven weeks to organise.
Debenhams has £520 million of debt facilities, including more than £300 million in loans and £200 million in bonds. It is understood that the board has framed discussions around securing a deal on a £150 million revolving credit facility by the end of this month. The chain’s quarterly rent bills are due on March 25. The latest attempt at a boardroom coup follows Ashley’s ousting of Sir Ian Cheshire in a shareholder vote backed by fellow investor Milestone Resources in January. He also used the vote to demote chief executive Sergio Bucher from his position on the board.
Ashley, who owns 30 per cent of Debenhams shares, said on Thursday evening that he now wants to remove all but one of the current Debenhams board and take charge. The exception is a new recruit – finance director Rachel Osborne.
In a statement, Ashley said he would step down as chief executive of Sports Direct if Debenhams complied with his plans, under which Sports Direct’s deputy finance director Chris Wootton would become acting chief executive. Ashley said he had ‘ every confidence’ i n Wootton, who has worked at Sports Direct for just over two years.
Last week, Debenhams issued a profit warning because the cost of a £40 million short-term loan and the tough economic climate had hampered progress.
The crash in the share price in recent weeks will see Debenhams relegated from the FTSE All-Share index later this month, despite a rally on Friday following Ashley’s expression of renewed interest.
Last week, the shares jumped 16 per cent to 3.5 pence after Ashley’s statement prompted optimism from investors.