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Debenhams offered £150m interest-free loan by Sports Direct

Published on: March 14th, 2019

In return, Sports Direct founder Mike Ashley wants to be made chief executive and receive a further 5% stake in the retailer. 

Sports Direct set out its one-year loan proposal as an alternative to a £150m loan Debenhams is negotiating to obtain from existing lenders as the department store chain battles for survival.

Mike Ashley’s group said the loan would be interest-free if Debenhams issued shares that would enable Sports Direct to increase its stake from just under 30% to 35% without having to bid for the rest of the company. If it could not increase its stake, Sports Direct said, its loan would come with 3% interest charges.

Under Takeover Panel rules, a shareholder with 30% or more of a company must make a bid for the whole group, but this can be sidestepped via a “whitewash agreement” that would have to be approved by independent shareholders.

The loan offer is Mike’s latest tactic in a battle with Debenhams and came hours after he accused the company’s board of putting out “deliberately misleading” statements. In a letter sent to the department store chain after it was informed of plans for a profits warning on 5th March, Sports Direct criticised the Debenhams board for changing its view only a few weeks after publishing a statement saying the company was “on track to deliver current-year profits in line with market expectations”.

The letter claimed that the board and chief executive of Debenhams had “no place leading a plc or in making public statements to the market”, as its 10th January statement had proved “at best impossibly optimistic or at worst deliberately misleading” given that it had soon after put out a profits warning despite an improvement in sales performance.

Sports Direct suggested that the majority of shareholders’ interests were being undermined by “continued misleading public statements and cloak and dagger actions in the refinancing process”.

Debenhams said in a statement: “We reject these unfounded and self-serving complaints. Debenhams’ board has taken advice at every stage in order to ensure that its announcements have been consistent with the disclosure requirements. The company is seeking to execute a much-needed restructuring – in the interests of all stakeholders – while its biggest shareholder tries to undermine the process at every turn.”

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