Mike Ashley slams Debenhams administration as "national scandal"
Mike Ashley has called the administration of Debenhams a “national scandal” and called for the process to be reversed after the retailer’s lenders seized control.
The so-called pre-pack administration wipes out the stakes held by Sports Direct and all other shareholders.
It also cancels plans for an emergency shareholder meeting in which Ashley was to seek his appointment to the board and attempt to oust most other directors.
In a statement issued to the market on Tuesday afternoon, Ashley said the administration should be reversed and Sports Direct given access to information to “save the business for all stakeholders”.
He also slammed the authorities and the retailer’s advisers. “These politicians and regulators have proven to be as effective as a chocolate teapot,” he said.
“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.”
Administrators at FTI Consulting were appointed to the retailer at just before 10am on Tuesday and immediately sold the group’s operating companies to a new entity owned by its lenders.
The process does not affect the retailer’s pension scheme, suppliers, landlords or its immediate trading plans.
Chairman Terry Duddy said: “It is disappointing to reach a conclusion that will result in no value for our equity holders.
“However, this transaction will allow Debenhams to continue trading as normal; access the funding we need; and proceed with executing our turnaround plans, whilst deleveraging the group’s balance sheet.
“We remain focused on protecting as many stores and jobs as possible, consistent with establishing a sustainable store portfolio in line with our previous guidance.”
Earlier in the day, Ashley’s Sports Direct had made a revised £200 million rescue offer for Debenhams, delaying the department store’s administration.
The offer involved underwriting a rights issue which would have seen existing investors buying newly-issued shares and was an advance on a £150m plan tabled on Monday, which was rejected.
Under the proposal, Debenhams’ lenders would have had to agree to write off £82m of its £720m debt mountain, as well as install the tycoon as chief executive.
Lenders to Debenhams said the proposal, on the terms set out, was “not sufficient”.
Debenhams said in a statement: “The board confirms that it received a revised, highly-conditional proposal from Sports Direct in the early hours of 9 April, which indicated a willingness of Sports Direct to underwrite an equity issue of £200m.
“The company’s lenders have confirmed to the company that the proposal, on the terms set out, was not sufficient to justify an extension to the 8 April deadline.”
The pre-pack administration undertaken by the struggling department store chain will see its debt reduced and comes ahead of a wider restructuring which will see around 50 stores closed.
It will also see a £200m refinancing plan, announced in March, go ahead.
Sports Direct confirmed on Tuesday afternoon that it was no longer looking at making a formal takeover offer for Debenhams.
However, advisers at Lazard have been instructed to oversee a sale process for the retailer which will launch immediately, leaving the window open for Ashley or another buyer to gain control of the chain.
Any bid would need to include the full repayment of the group’s debt.
Laith Khalaf, equity analyst at Hargreaves Lansdown, said it was a “hefty price tag to stump up for a company that’s struggling to make ends meet”.
“In theory it’s conceivable there could be some residual value for shareholders as part of this process, but it’s extremely unlikely,” he said.