Debenhams rescue depends on making Ashley the boss

and

MIKE ASHLEY has tabled a last-minute £150million rescue offer for Debenhams in a lifeline dependent on the tycoon becoming chief executive.

In a letter sent to the struggling department store on Friday – just days before the billionaire’s April 8 deadline to make a formal bid – the Sports Direct owner offered to underwrite a £150million rights issue to save the business from a pre-pack administration deal.

However, his offer is contingent on a string of conditions understood to have angered Debenhams’ board. This includes Mr Ashley being installed as chief executive, a move directors have already pushed back on, as well as lenders taking a loss.

Mr Ashley, who bought House of Fraser out of administration last year, wants bondholders to write off £148million worth of debt and agree to a debt-for-equity swap so that Debenhams’ debt mountain is brought down to around £300million. One insider aware of the letter said there are some “flashing red lights” in the offer which could concern lenders and the board.

“At the moment [Mr Ashley] has next to no leverage in this situation. The concern is if you give him control he walks into the business, has a poke around and says ‘this is even worse than I thought’ and goes for an uncontrolled administration,” the insider said.

The letter says Sports Direct, which has amassed a near 30 per cent stake in Debenhams, is “keen to remain a supported shareholder and financier”.

The vote of confidence comes despite multiple legal threats from Mr Ashley. Last month he renewed his call to oust Debenhams’ board. The two sides are expected to make a stock market announcement about the offer tomorrow. Lenders had not responded to the offer at the time of writing.

Debenhams declined to comment and Sports Direct could not be reached.