Mike Ashley: Debenhams administration a “national scandal”

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Mike Ashley Debenhams
// Mike Ashley has called Debenhams’ pre-pack administration a “national scandal”
// He called for the process to be reversed in favour of a “full, better & appropriate solvent solution”
// Now under the control of lenders, Debenhams is up for sale
// Sports Direct has already registered its interest for the sale

Sports Direct has labelled Debenhams’ administration a “national scandal” and has called for the process to be reversed, while its billionaire owner Mike Ashley vowed to save as many stores as he can.

Sports Direct released an explosive stock market announcement yesterday after the department store appointed joint administrators from FTI Consulting, who immediately sold the PLC part of Debenhams to a newly-incorporated company controlled by secured lenders in a pre-pack administration deal.

It’s expected that the lenders will now try to sell the department store retailer, given that the deal “included provisions for a group sale process to be launched immediately”.

The pre-pack deal effectively meant all of Debenhams’ previous shareholders – including Ashley’s Sports Direct, which had a near-30 per cent stake in the department store – had their equity wiped out.

As only the PLC part of the business went into administration, all 165 of Debenhams’ stores will operate as per usual and its commercial relationships with suppliers, employees and pension holders remain unaffected.

However, Sports Direct said this marked “the end of this sorry chapter in Debenhams’ history”.

The stock market announcement came after a bitter struggle for control between Debenhams’ board of directors and Ashley, with the former rejecting several rescue offers and takeover attempts from its biggest shareholder in the last few weeks.

Sports Direct said the recent events led to “this disastrous outcome”, and were “totally avoidable and represent the complete destruction of shareholder value”.

It also alleged that the pre-pack deal was “a long time in the planning” and some of the lenders had outlined their intention to take control of Debenhams back in autumn last year.

“At every turn the board of Debenhams, and more latterly the lenders, have sought to stall, prevent or block constructive dialogue or progress being made,” Sports Direct’s statement read.

“All of Sports Direct’s proposals and offers of support have been rebuffed with scant constructive dialogue or discussion in the period leading up to this outcome.”

It added: “This is nothing short of a national scandal – and one that could so easily have been avoided if Debenhams had chosen to engage with its largest shareholders constructively rather than obstructively.

“At various times, Sports Direct and its representatives have been stalled, dissembled to and misled by Debenhams and its advisors.

“Numerous statements by the board of Debenhams have at best been over-optimistic in their description of the business’ performance, its outlook and the likely impact of the board’s actions on Debenhams’ shareholders.

“Sports Direct has asked time and again how a business – particularly a listed PLC – can operate in such a manner and whether it is about time that regulators investigate fully how Debenhams was run and how the market and shareholders have been misled.

“Sports Direct has repeatedly asked regulators and MPs to stop this destruction of a British institution, and they have done nothing.

“Although Sports Direct still expects them to act, it is too little too late.”

Hours before Debenhams announced its administration yesterday, Sports Direct made a desperate last-minute rescue bid in the form of underwriting a £200 million rights issue which would see investors buying newly issued shares.

It came with the condition that Ashley is made chief executive of the retailer and was an advance on a £150 million plan that had been tabled and rejected the day before.

However, Debenhams’ lenders said that proposal, on the terms set out, was “not sufficient”.

The secured lenders that have now taken control of Debenhams are a mix of banks and US hedge funds, such as Barclays, Bank of Ireland, Silver Point and GoldenTree.

It’s expected they will try to sell the retailer as soon as possible, with the sale process to be conducted by Lazard.

Sports Direct has already registered its interest with the chain’s interim owners, according to BBC News.

“Now the future of thousands of Debenhams employees, shareholders, pensioners, landlords and suppliers lie in the hands of the lenders, including off-shore-based hedge funds,” Sports Direct’s statement read yesterday.

It added: “Sports Direct will not stop in its quest to get to the bottom of this appallingly managed process and to find and hold to account those responsible for this final turn of events.

“This is a tragedy. There is no other way of putting it, especially when a long-term solution was there for the taking.”

Ashley said: “As normal, politicians and regulators fiddled while Rome burnt. These politicians and regulators have proven to be as effective as a chocolate teapot.

“I restate my call for the advisers to go to prison given their skulduggery in undermining shareholders and other stakeholders, such as employees and pensioners.

“While these hedge funds look to close a significant number of stores and put thousands of people out of work, as politicians and regulators look on, I will go to the ends of the Earth to save as many Debenhams stores and jobs as I can, similar to the promise I made with regards to House of Fraser.

“While there may be some short-term cost to Sports Direct and our shareholders, sometimes you have to do the right thing, something the board of Debenhams and the hedge funds have manifestly failed to do.

“I call on the authorities to reverse the administration process so that a full, better and appropriate solvent solution can be found.

“This solution would include allowing myself and appropriate senior Sports Direct management access to detailed information to save the business for all stakeholders.

“The board of Debenhams and its advisers have sought to stifle and exclude us from their so-called process and have undermined and blocked our various offers of assistance as they carried out their underhand plan to steal from shareholders.”

In its full year report late last year – whereby it revealed a historic statutory loss of £491.5 million – Debenhams revealed plans to close around 50 under-performing stores in the next three to five years.

A full list of shops which it may shut down has not been revealed yet, but the retailer has reportedly been renegotiating rents with landlords and there is speculation a CVA in the coming months to fast-track the planned 50 store closures.

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