RE: Rights issue7 Apr 2019 13:59
Dazza1970 I suggest you stop reading articles upside down.
Mike Ashley has offered to underwrite a £150m rights issue at Debenhams in a dramatic last-minute intervention in the battle over the struggling department store group, two people briefed on the matter said.
In a letter to the board of Debenhams dated April 5, Sports Direct said it would be prepared to underwrite a £150m cash call but maintained its previous demand that Mr Ashley, the billionaire founder of Sports Direct, be made chief executive of Debenhams.
The department store group has not yet formally responded to the offer, but the intervention makes it likely that the April 8 deadline for Mr Ashley to declare his intentions will be extended. The creditors had effectively challenged Sports Direct, which already owns 29 per cent of Debenhams’ equity, to either make a bid for the rest or underwrite a £200m rights issue.
The proposal is the latest in a series of offers that Mr Ashley has made to Debenhams. Over the past month, Sports Direct has offered to lend the company £150m, acquire its Danish operation for at least £100m, or potentially launch a 5p a share takeover bid for all the remaining equity. No price has been indicated for the rights issue.
The offer would require the agreement of the group’s creditors, with whom Debenhams has agreed a separate refinancing plan entailing a pre-pack administration of the company that would render its equity worthless.
The creditors include both European institutions and US-based hedge funds such as Silverpoint Capital.
Most of Sports Direct’s overtures have been conditional on Mr Ashley being made chief executive, a move that both Debenhams and its creditors have resisted. Debenhams argues that because Sports Direct controls House of Fraser, which it regards as a direct rival, Mr Ashley should not be allowed to run Debenhams at the same time — even though he has indicated he would step down as chief executive of Sports Direct.
Debenhams’ plight has worsened this year as trading weakened, and the withdrawal of its trade credit insurance cover forced it to increase working capital. In February, it secured an additional £40m from its lenders in a deal that significantly increased their influence over the company.
If it proceeds with the creditor-backed refinancing, it is expected the company would implement a company voluntary arrangement to close around 50 stores and reduce rents or lease lengths at others. Mr Ashley and his team have previously said that only a few stores need to close.
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