Debenhams Lenders Rebuffed Mike Ashley’s Bid for Power

(Bloomberg) -- Billionaire Mike Ashley’s push to oust the board of Debenhams Plc came after creditors of the troubled U.K. retailer repeatedly rebuffed his bid to take over immediately as chief executive officer, according to people familiar with the situation.

Ashley, whose Sports Direct International Plc is the biggest investor in the department-store chain, has stepped up his campaign by appealing directly to shareholders. The tycoon late Thursday called for a special vote to unseat all but one of the company’s directors and install himself in a management role.

Debenhams, an anchor of Britain’s shopping streets, is racing to keep Ashley at bay as it pursues a financial restructuring that could dilute shareholders’ stakes -- including his roughly 30 percent interest. The most likely outcome of those talks is a combination of a debt-for-equity swap and a so-called company voluntary arrangement, according to the people. The CVA, a form of insolvency procedure, would help the company negotiate lower rents and close stores.

Lenders pushed back on Ashley’s campaign for the CEO job in repeated discussions culminating this week, the people said, triggering his call for a general meeting of investors. Creditors didn’t rule out a management change, but postponed talks on the matter until after a restructuring plan is reached, they said.

General Meeting

Debenhams has 21 days to schedule a general meeting and 28 thereafter to hold it, giving it just under two months to reach a refinancing deal.

The Debenhams board “is disappointed that Sports Direct has taken this action,” it said in a statement. “In the meantime, discussions to address our future funding requirements are well advanced.”

A Sports Direct representative could not be reached for comment.

Debenhams was up 17 percent midday Friday in London, but it’s lost 85 percent over the past 12 months, cutting the market value to about 44 million pounds.

Lenders are prepared to grant more credit alongside the financial restructuring in an effort to ward off a potential lowball buyout bid from Ashley, a person familiar with the situation has said. Creditors loaned Debenhams 40 million pounds ($52 million) last month, after the company rejected an offer for the same amount from Ashley in December.

House of Fraser

Ashley’s move to oust the board marks the retail tycoon’s boldest action yet in a quest for greater control over the U.K.’s shopping streets via a string of acquisitions. Last year, he took over department-store chain House of Fraser, a rival of Debenhams, after it began insolvency proceedings.

The latest proposal came just two days after Debenhams issued its fourth profit warning in 14 months. The company said the cost of a rescue plan it stitched together earlier this year would weigh on earnings, even as sales showed some signs of stabilizing.

Earlier this year, Ashley orchestrated the ouster of Chairman Ian Cheshire and CEO Sergio Bucher from the board, though Bucher maintained his executive role.

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