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Debenhams Rejects Ashley’s Offer as Lenders Threaten Control

Mike Ashley Floats New Plan to Stave Off Debenhams Equity Wipeout

(Bloomberg) -- Debenhams Plc rejected billionaire Mike Ashley’s latest rescue offer, increasing the odds that he and fellow shareholders will get wiped out as lenders take control of the troubled retailer.

Ashley’s Sports Direct International Plc said Debenhams turned down its proposal to underwrite a 150 million-pound ($196 million) equity raising on the same day that restructuring talks with creditors are due to reach a conclusion. Ashley disclosed the last-ditch offer earlier on Monday, a move to prevent losing much of his equity investment in the department-store chain.

The latest rejection of the retail magnate comes after Debenhams gave Ashley an ultimatum on March 29 to commit to a debt reorganization on lenders’ terms or risk losing his investment when the company initiates a so-called prepackaged administration. Debenhams was already preparing for that eventuality last week because Ashley hadn’t agreed to the terms. Monday’s refusal makes administration even more likely.

Debenhams Rejects Ashley’s Offer as Lenders Threaten Control

Ashley called on the company and its lenders to “actively engage in negotiations.” He said a cash offer valuing the chain at 61 million pounds remained an option even after Debenhams rejected the equity raise. The retailer declined to comment on Ashley’s offer and the statement.

Ashley has been locked in a battle with Debenhams’s lenders, including banks and U.S. hedge funds, as the chain seeks to restructure about 720 million pounds of debt and cut its rent bills. The more than 200-year-old retailer is fighting to avoid the fate of many stores on the U.K. shopping streets that are floundering amid an increase in online shopping and weaker consumer confidence over Brexit.

A prepack administration would mean that shareholders would likely lose their investments; Sports Direct has a roughly 30 percent stake. Debenhams’s shares, which have fallen more than 90 percent over the past 12 months, were down 10 percent Monday afternoon after early gains.

Ashley’s latest offer came after Sports Direct accused Debenhams of “a sustained program of falsehoods and denials.” In a statement late Sunday, it called for board members of the department-store company to take lie-detector tests.

The chief executive officer of Sports Direct said his support for the rights issue would have been conditional on the department-store chain naming him CEO, a sticking point in earlier negotiations. The company also previously snubbed an offer from Ashley for a 150 million-pound interest-free loan, preferring a new financing package from creditors.

To contact the reporters on this story: Katie Linsell in London at klinsell@bloomberg.net;Ellen Milligan in London at emilligan11@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John Lauerman

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