Debenhams is forging ahead with plans for a £200m rescue deal with its lenders as it said a potential bid from Sports Direct would come too late to provide the funds needed to keep the department store chain afloat.
In a statement to the stock market, the ailing department store chain said it would give “due consideration” to any firm offer from Sports Direct, which announced on Monday that it was mulling a possible cash bid.
Debenhams said any proposal from Sports Direct must indicate a price, a clear plan for repayment of Debenhams’ £560m of debts – all of which would fall due on a change of control – as well as a plan to address the business’s immediate funding requirements.
Sports Direct, which already owns nearly 30% of Debenhams, has until 22 April to file a firm bid. Debenhams shares rose 42% to 2.2p, valuing the equity at almost £27m . Ashley is understood to have held discussions with lenders about refinancing Debenhams’ debts but the retailer’s board is sceptical that he is serious about making an offer.
“There is no certainty that any offer will ultimately be forthcoming,” the company’s board said on Tuesday.
The potential bid is the latest in a flurry of tactics Ashley has tried to wrest control of Debenhams and prevent Sports Direct’s stake from being wiped out under a planned rescue refinancing.
The company is seeking to borrow up to £200m in a deal which would involve either a pre-pack administration or a debt-for-equity swap with existing lenders and an insolvency procedure known as a company voluntary arrangement to facilitate the closure of up to 50 stores. About £40m of that money will refinance a short term facility set up in February.
The company is also seeking to refinance long term loans and bonds, £520m which expire next year.
Sports Direct has previously offered Debenhams a loan of £150m, or to buy the group’s Danish chain, Magasin du Nord, for at least £100m as alternatives to the department stores group having to raise money from existing lenders. Ashley has also called a shareholder meeting at which he wants to oust all but one of Debenhams’ directors and install himself as chief executive.
Laith Khalaf, a senior analyst at Hargreaves Lansdown said: “This is a sign Mike Ashley isn’t making progress taking control of Debenhams by any other means, and so a takeover bid may now be his last resort. Ashley’s in a race against the clock however, because Debenhams is in the process of refinancing its debt, which will give its creditors even greater control of the company.
“If Mike Ashley wants to make this stick, he needs to come out with an offer pretty quickly, along with a plan to meet Debenhams’ immediate funding needs.”
