Fight for Debenhams Intensifies as Ashley Counters Creditor Loan

(Bloomberg) -- Debenhams Plc said it’s seeking 200 million pounds ($262 million) of new funding under a creditor plan that could wipe out shareholders including billionaire Mike Ashley, who countered with his own offer to take control of the struggling U.K. retailer.

The latest back-and-forth between the troubled chain and its biggest investor prompted as much as a 62 percent plunge in the shares to 1.1 pence. They were trading at 1.9 pence at 11:10 a.m. in London.

A group of hedge fund and bank creditors and Ashley’s Sports Direct International Plc are vying for control of the department-store operator as it seeks to restructure about 560 million pounds of debt. Both parties had offered the company 150 million pounds of fresh money to keep it afloat.

Debenhams started a process on Friday to get bondholder approval for new lending from its existing creditors by 5 p.m. on March 28, according to a statement. The company needs bondholders’ consent to access the new money, which would allow it to pursue restructuring options that include reducing current shareholders’ equity value to zero.

Ashley’s Sports Direct responded with an offer to buy Debenhams’ Danish operations for 100 million pounds. Under the plan, the retailer would have a 12-month option to buy back its Magasin du Nord stores at the same price and Ashley would become director and chief executive officer at Debenhams.

‘Undermine the Process’

A spokesman for Debenhams declined to comment immediately on Sports Direct’s latest move. He said in an email that “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.”

Ashley has stepped up his campaign for Debenhams as his roughly 30 percent stake in the retailer looks increasingly at risk of being wiped out. Sports Direct has already called for a shareholder vote “as soon as possible” in which Ashley seeks to appoint himself to the board and remove all current members other than Chief Financial Officer Rachel Osborne.

He has threatened to expose what he says is an insider plot to hand the company to hedge funds in an effort he’s dubbed “Project Serpico.” In January he led a successful ouster of Debenhams’ chairman and chief executive officer from the board. Ashley owns one of the retailer’s largest rivals, House of Fraser, after buying the company out of administration last year.

©2019 Bloomberg L.P.