Debenhams’ board has won more time to rally shareholders and sort out its finances ahead of a coup attempt by Mike Ashley, after a clerical error by Sports Direct.
A shareholder meeting at which Ashley wanted to oust all but one Debenhams director and install himself as chief executive has been delayed by up to two weeks, after Sports Direct was forced to reissue its requisition notice calling the meeting.
The delay comes as the department store battles for survival with its lenders weighing up whether to put the company into administration or hand it a funding lifeline.
Key lenders, including the US hedge funds Alcentra, Angelo Gordon & Co and Silver Point Capital, are understood to have lined up advisory firm FTI Consulting to handle a pre-pack administration if a suitable funding deal, which could include up to £160m of new money, cannot be agreed.
A rent bill of £50m is due on Monday, but it is understood the company has sufficient funds to finance that payment.
Debenhams’ board has already revealed it is trying to finalise plans to raise at least £110m in new cash and refinance a £40m short term loan agreed in February.
But it is understood it may now need up to £50m extra to see it through the year as the company’s finances suffer from uncertainty over its future, which has prompted many suppliers to demand cash for goods upfront.
The company also needs to refinance £520m of longer-term debt which expires next year.
The process has been complicated by intervention from Sports Direct, which is attempting to protect its near 30% stake in Debenhams.
Ashley has offered to lend the company £150m in return for the chief executive post.
But Debenhams’ board sees his proposals as an attempt to wrest control of the department stores group on the cheap.
Ashley’s attempt to take the helm at Debenhams is also complicated by the terms of some of its loans and bonds, which would enable creditors to call in their debts in the event of a change of control. That would put the company into administration, handing control to lenders.
In a statement issued on Thursday morning, Sports Direct said its initial requisition notice for the shareholder meeting, put out on 7 March, was invalid because at the time it had held its shares in a third party account.
The statement now resets the timetable, giving the Debenhams board 21 days to name a date for the meeting, which must then be held within 28 days of the notice, taking the final possible date to 9 May.
One source said: “The name on the letter didn’t match that on the shareholder register. It’s a cock-up not a conspiracy.”
