Debenhams has rejected a £150m proposal made by Sports Direct as Mike Ashley attempts to prevent the department store from falling into the hands of its lenders.
The latest plan from Sports Direct International – first revealed by Sky News – offered to underwrite a £150m rights issuance for the department store chain in exchange for lenders agreeing to write off £148m of debt.
Sports Direct, which owns 30% of the struggling chain, wants to install Mr Ashley as chief executive as it seeks either to refinance the business or take it over entirely.
But relations between the two companies have descended into acrimony with Sports Direct suggesting that members of the Debenhams board take lie detector tests over a disputed meeting.
Without a deal between the two sides by the end of Monday, the 340-year-old chain faces being placed into a pre-pack administration with lenders taking control – wiping out the holdings of shareholders including Sports Direct.
Mr Ashley has been battling to prevent this outcome but a series of overtures towards Debenhams, all of which involve him taking the job of chief executive, have been rejected.
They include a possible cash bid valuing the chain at £61.4m, which remains on the table.
However, earlier today Sports Direct accused the board of “a sustained programme of falsehood and denials” in relation to a disputed meeting attended by Mr Ashley, Debenhams chairman Terry Duddy and board member David Adams.
Debenhams, according to Sports Direct, had denied a claim that at the meeting “misrepresentations were made to induce Sports Direct into signing a non-disclosure agreement locking them out of any ability to trade in the bonds or equity of Debenhams for a period of time”.
Sports Direct said that Mr Ashley and two colleagues who attended the meeting had taken lie detector tests about what had happened.
It added: “The results showed without any doubt that the three members of Sports Direct were telling the truth in their recollection of the meeting, and indeed Mike Ashley’s score was so significantly high as to be considered rare in comparison to others.
“Sports Direct would welcome Terry Duddy and David Adams taking their own lie detector tests to clarify their recollection of this meeting.”
Debenhams declined to comment on the statement.
The department store has stipulated four conditions it would require Mr Ashley to fulfil for it to consider asking lenders to extend its refinancing deadline on Monday.
These are: that he withdraws his request for a clear-out of the board; stops making damaging public statements about the company; agrees to a joint news release with Debenhams and its lenders; and provides a legal guarantee that promised funds will come through.
Debenhams, which operates 241 stores in 22 countries, is already planning a series of closures in response to tough trading.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “In theory a deal could be struck, but relations seem far from cordial, and the Debenhams management look set on giving the lenders control of the high street chain.
“Mike Ashley’s methods may be unorthodox, to say the least, but the Debenhams board needs to make sure it gives Sports Direct’s offer proper consideration.
“The job isn’t an easy one, but they need to balance the interests of shareholders, lenders and employees.
“So far they haven’t given a great deal of detail as to why Sports Direct’s proposals have been kicked to the kerb, while lenders have been handed the keys to the company.”