Today, Sports Direct revealed that it has made an alternative loan proposal to Debenhams, the troubled department store chain, as the latter was on the brink of securing funds to fend off the bid of Mike Ashley to take charge of the firm.
Mike Ashley is the founder and majority shareholder of Sports Direct. Last week, he launched a move to take over running the ailing company. He is proposing to remove the majority of the member of its board and appoint himself in an executive position. Sports Direct owns almost 30 percent of Debenhams.
Debenhams is struggling with net debt of nearly 300 million pounds. It was also one of the firms that were badly affected by the rapid shift online and weak consumer spending. It then said that it was in advanced negotiations with lenders for additional loans of approximately 150 million pounds.
The alternative deal that was proposed today applies “on or before 31 March 2019.” It includes a loan on similar terms, however, in return Sports Direct is requiring that it should be issued with approximately 5 percent of new shares. It also demands that Mike Ashley must be appointed as a director and the chief executive of Debenhams.
Sports Direct said that if ever the 5 percent share issue and related conditions are approved by the independent shareholders of Debenhams, the 150 million pounds loan would be guaranteed to be interest-free. It added that if it is not approved, the loan would come with an interest of 3 percent.
Debenhams turned down requests for comment regarding the matter.
Debenhams also rejected the complaints from Sports Direct regarding an earlier disclosure to the market ahead of a profit warning that was released this month.
In a letter that was sent to the department store chain after it was notified of the plans for a profits warning on the 5th of March, Sports Direct slammed the board of Debenhams for changing its view only a few weeks after publishing a statement announcing that the firm was “on track to deliver current-year profits in line with market expectations.”