Debenhams in crisis as Ashley talks stall

It comes as Sports Direct’s £150 million rescue offer for the department store was rejected.

That puts the high street retailer on course for a probable administration.

The store has several branches across the region, including at Merry Hill Shopping Centre and in Walsall, Telford, Kidderminster and Birmingham. Its flagship store in Wolverhampton opened in 2017, taking up a 93,000sqft unit in an expanded Mander Centre.

Debenhams warned last year it faced widespread store closures, but it was hoped a deal with Sport Direct owner Mike Ashley could provide it with a sustainable future.

A rescue package promised to underwrite a £150 million rights issue, on the condition Mr Ashley be made chief executive of Debenhams.

In a statement, Sports Direct said its proposal had been rebuffed and called for the Debenhams board and its lenders to actively engage in negotiations to save the chain.

Mr Ashley was previously given a deadline of 5pm yesterday to fulfil one of two conditions to prevent Debenhams from falling into the hands of lenders.

As talks stalled it appeared increasingly likely that the retailer would go into a ‘pre-pack’ administration, wiping out Sports Direct’s stake and all other shareholders.

Over the weekend Mr Ashley tore into Debenhams executives, calling on Sunday night for the board of the struggling high street chain to be investigated, two members to undergo lie detector tests, and trading in its shares to be suspended.

As well as accusing Debenhams bosses of “a sustained programme of falsehoods and denials”, the sportswear chain founder added that, in a meeting, “misrepresentations were made to induce Sports Direct into signing a non-disclosure agreement, locking them out of any ability to trade in the bonds or equity of Debenhams for a period of time”.

In an extraordinary outburst, Mr Ashley claimed he and two colleagues subsequently took lie detector tests, with the results showing “without any doubt” that they were telling the truth in their recollection of the meeting.

Sports Direct called for Debenhams interim chairman Terry Duddy and non-executive director David Adams to take their own lie detector tests to “clarify their recollection of this meeting”.

Mr Ashley has a near-30 per cent stake in the department store but faces having that wiped out if it presses ahead with a £200 million refinancing plan announced in March.

Under the proposal, £101 million is to be drawn down immediately to allow restructuring, which will include store closures and rent reductions.

The other £99 million would have been made available if Sports Direct – or any other shareholder with a stake of more than 25 per cent – fulfilled one of two conditions by April 8.

One option allowed Mr Ashley to make a takeover offer which included arrangements to refinance the group’s debt.

Alternatively, he had to call off an emergency meeting he requested to install himself on the retailer’s board and commit to either providing funding for the business or underwriting the issue of new shares.

The Newcastle United owner made the now-rejected offer on Friday, saying it would form part of a “comprehensive refinancing” of Debenhams and would be contingent on the retailer’s lenders agreeing to write off £148 million of debt.

Sports Direct is continuing to “actively evaluate” a conventional takeover, priced at 5p per share.