Struggling British department store chain, Debenhams, says it will give “careful consideration” to the offer of a GBP150m (US$198.7m) loan from its largest shareholder, Sports Direct boss and retail tycoon boss Mike Ashley.
The proposal comes just three days after Debenhams said it is making progress on securing a cash injection of the same amount and is in “advanced negotiations” with its current lenders.
The alternative GBP150m would be “guaranteed to be interest-free”, Sports Direct said, providing Debenhams issues 5% new shares at the prevailing market price to Sports Direct, increasing the retailer’s shareholding to 35%, and appoints Ashley as a director and the CEO of Debenhams.
“If such approvals were not forthcoming, the loan would bear interest at 3%,” Sports Direct said in its statement last night (13 March).
Of the total amount of the lending, the company added GBP40m would be used to repay Debenhams’ GBP40m bridge facility with an attendant release of security. The remaining GBP110m would be available for general working capital.
The move comes on the back of a control bid from Ashley on Friday (8 March), which saw Sports Direct call for a general meeting of the retailer to appoint Ashley to the board and to remove all of the current members, other than chief financial officer Rachel Osborne.
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By GlobalDataNow, in response to Ashley’s latest move, Debenhams said any third party loan offer on these terms would require both the consent of its RCF Lenders and Noteholders and material amendments to existing facilities.
“Nevertheless, the board will give careful consideration to the proposal and will engage with Sports Direct and other stakeholders regarding its feasibility in the interests of all parties,” it added.
The news comes in the wake of a fresh profit warning issued by Debenhams last week as sales continue to fall.
Shares in the British department store group were down by 3.5% on 5 March as the company warned its forecast made on 10 January – which stated the group was “on track to deliver current year profits in line with market expectations” – is no longer valid.
