Debenhams suspends trading in shares after snubbing £200m Sports Direct offer

Sports Direct has upped its bid to save department store Debenhams slipping into administration today, but appears to have failed.

The Shirebrook-based firmincreased its offer to underwrite a rights issue to £200m – £50m more than the amount the Debenhams board turned down yesterday (8 April), but Debenhams this morning suspended trading in its shares.

The deal, which Sports Direct says would form part of a “comprehensive” refinancing of Debenhams, is subject to a number of conditions, including the appointment of Mike Ashley as Debenhams’ CEO and Debenhams’ lenders agreeing to write-off £82m of Debenhams’ £720m total debt facilities.

A statement from Sports Direct said: “Sports Direct has informed the board of Debenhams that Sports Direct is available to discuss this at any time. Sports Direct also called upon the board of Debenhams to engage with Sports Direct to find a solvent solution for Debenhams which is in the best interests of all of Debenhams stakeholders.”

Sports Direct owner Mike Ashley desperate to preserve the value of his near-30% share in Debenhams, which would be wiped out if it was sold in a pre-pack deal.

However, Debenhams again snubbed the fresh offer, as it prepares for administration by suspending its shares at 8am.

In a statement this morning (9 April), Debenhams said: “The company is in discussions with its lenders regarding the availability of the remaining facilities that have not yet been drawn down.  As announced on 29 March, and as a result of the milestones relating to a potential transaction with Sports Direct not having been met, it is likely that these facilities will now only be available to the group’s subsidiaries upon transfer of those subsidiaries into the ownership of a lender-approved entity. This outcome would ensure the stability and continuing trading of the group’s operating subsidiaries, with no disruption to the group’s business, customers, employees, pension holders, suppliers or operations. This outcome would result in no equity value for the company’s current shareholders.

“The Board confirms that it received a revised, highly-conditional, proposal from Sports Direct in the early hours of 9 April, which indicated a willingness of Sports Direct to underwrite an equity issue of £200 million. The company’s lenders have confirmed to the company that the proposal, on the terms set out, was not sufficient to justify an extension to the 8 April deadline.

“The company anticipates making a further announcement during the course of the day following further discussions with its lenders.”