UK's Debenhams pays lip service to Mike Ashley loan offer

Sports Direct offers Debenhams £150m interest-free loan

In a brief statement Sports Direct said that the loan would be "guaranteed to be interest-free" if the fashion house issues 5pc new shares to the company and appoints retail tycoon Mike Ashley as director and chief executive.

Debenhams said any third party loan offer on the terms offered would require both the consent of its existing lenders and bondholders as well as "material amendments" to existing facilities.

"Nevertheless, the board will give careful consideration to the proposal and will engage with Sports Direct and other stakeholders regarding its feasibility in the interests of all parties", it said. Articles appear on euronews.com for a limited time. Without the equity, the loan would bear interest at 3 percent.

Under the terms of the loan offer, Debenhams shareholders would vote on whether to issue new shares to Sports Direct, taking its holding to 35%.

Of the total amount of the lending, £40m would be used to repay Debenhams' £40m bridge facility with an attendant release of security.

Sports Direct wrote to Debenhams directors before it warned on profit, saying comments made eight weeks earlier that cost savings were helping compensate for hard trading were "at best impossibly optimistic or at worst deliberately misleading", according to a report in the Financial Times.

It is the latest move in the maverick businessman's high street shopping spree.

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Sport Direct revealed on Wednesday they made a complaint to the City watchdog over Debenhams communications.

On Wednesday Sports Direct also stepped up its criticism of Debenhams' management, publishing a letter it sent to the company on March 4, the day before the deaprtment stores group's latest profit warning, accusing it of making misleading public statements.

In January Debenhams said it was "on track" to deliver current year profits in line with market expectations.

Eight weeks later, the retailer warned that its profits would be lower after a hit to sales in the 18 weeks to January 5.

Sports Direct owns nearly 30 percent of Debenhams.

The Sports Direct letter alleged that the update on 10 January was "quite clearly misleading" in saying "we continue to generate cash" given emergency funding of £40m was needed by Debenhams "a mere five weeks later".

Earlier this week Debenhams confirmed it is in advanced talks to borrow £150 million as part of efforts to stay afloat.

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