Mike Ashley’s Sports Direct has launched a searing attack on Debenhams top executives, accusing them of a “sustained programme of falsehoods” in an increasingly acrimonious battle for control of the struggling department store chain.
In a remarkable public statement, Sports Direct has called for trading in Debenhams shares to be suspended, for two board members to undergo lie detector tests, and asked for industry regulators to investigate how the company is being run.
The remarks were issued on Sunday night, as the Debenhams board was locked in emergency discussions, weighing whether to proceed with plans to drop into administration within days or recommend refinancing proposals that would cede control to Mr Ashley.
Sports Direct already owns 29 per cent of Debenhams and Mr Ashley has been battling to be installed as its chief executive, as part of efforts to counter rival refinancing plans that would make the shares worthless.
The talks between the parties have been overshadowed by a bitter dispute over comments made in a key meeting between the two companies.
Sports Direct said Mr Ashley and two members of his team attended a meeting with Terry Duddy and David Adams from the Debenhams board, “where it is considered 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 Mr Ashley and his colleagues had undertaken lie detector tests to prove their recollections of the meeting were accurate and that Mr Ashley had scored highly. The company called on Mr Duddy and Mr Adams to take similar tests.
A representative for Debenhams and its board members declined to comment, saying only that they intended to maintain a “dignified silence” in response to the allegations.
Debenhams had been expected on Monday to announce its response to a Sports Direct offer to underwrite a £150m rights issue that would dramatically reduce the struggling retailer’s debt. Sports Direct has made the offer conditional on Mr Ashley’s becoming chief executive of Debenhams.
The discussions were already fraught because of a “yawning trust gap” between Debenhams and Mr Ashley, according to a person close to the discussions.
The person said the Debenhams board is concerned that Mr Ashley could simply renege on the £150m promise if he gained full control of the company.
The rights issue would need 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 raise £100m in emergency funds and press ahead with plans to close up to 50 stores.
The creditors, which include both European institutions and US-based hedge funds such as Silverpoint Capital, have set a deadline of Monday April 8 for Mr Ashley to come up with alternative refinancing proposals or launch a takeover.
Mr Ashley has been resistant to launching a full takeover bid, which would trigger change of control clauses for Debenhams’ bank and bond debt. That could require him to refinance more than £500m of borrowing, equivalent to a doubling of Sports Direct’s existing net debt.
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