Debenhams turns down Sports Direct again, now in administration

By

Sandra Halliday

Published
Apr 9, 2019

Debenhams said on Tuesday it had rejected a “highly conditional” last-minute offer by its biggest shareholder Mike Ashley/Sports Direct to underwrite an increased £200 million rights issue and it has filed for administration. That means the firm becomes the property of its lenders with previous shareholders losing their holdings.

First thing on Tuesday, Debenhams had said it “confirms that the relevant milestones relating to a potential transaction with Sports Direct International plc, which would have made available the second tranche of the new facilities detailed in [an earlier]  announcement, were not met by the relevant deadline.”
 
It later said administrators have been appointed to Debenhams Plc but "the underlying group operating companies are unaffected and all businesses are continuing to trade as normal." It added that "the group's commercial relationships with suppliers, employees, pension holders and customers are all with the operating companies. Therefore, none of these stakeholders are adversely impacted by the administration."

So who exactly owns it now? Well, The Plc administrators have immediately sold all of the Plc's ownership of the group to a newly incorporated company controlled by its secured lenders in a pre-packaged sale. The company said the transaction "delivers continuity for all group operations and was in the best interests of the group's creditors, employees, customers, pension holders and suppliers."
 
Under its new ownership, it will be able to access "significant additional funding in line with the £200m new money facilities announced on 29 March 2019."

It will now continue to implement the restructuring of its operations, "including optimising the store portfolio (in line with plans already communicated) to improve trading performance and deleverage the business."

Sports Direct isn’t likely to take this lying down, although it’s unclear just what it can do at this stage. And while the trading operation's continuing existence must come as a relief to many Debenhams staff and suppliers, with as many as 50 of its stores expected to close at some point, there will inevitably be a large number of job losses and unhappy landlords. And a much smaller Debenhams is likely to be ordering less from suppliers in the future.