Pre-pack administration looms as Debenhams shuns Mike Ashley

Sports Direct had said it was willing to underwrite new shares but that offer was subject to various conditions, including the appointment of Ashley as Debenhams’ chief executive and Debenhams’ lenders agreeing to write off £148m of debt.

Debenhams is now on the brink of a pre-pack administration, which would pass control to its lenders.

However, Sports Direct insisted it continues “to actively evaluate all possible options to support Debenhams” including giving “active consideration” to a £61.4m possible bid it has been mulling.

Sports Direct said it had “sought to constructively engage with the Debenhams board” and it was “disappointed” with the response.

Debenhams has already said restructuring options being considered would not immediately disrupt its “business, customers, employees, pension holders, suppliers or operations”, but would “very likely result in no equity value for the company’s current shareholders”.

Sports Direct owner Ashley, who already owns department store rival House of Fraser, has been seeking to seize control of Debenhams since late last year.

He succeeded in forcing chair Sir Ian Cheshire out of the business and chief executive Sergio Bucher from the board at its AGM in January.

Since then he has agitated for control of the business, pledging to either make an offer for Debenhams or underwrite an equity issue if he were made chief executive. He has continued to push for the departure of the rest of the Debenhams board, aside from chief financial officer Rachel Osborne.

In recent weeks, his campaign has escalated as he has demanded that members of Debenhams board take a lie detector test and declared that the business’ advisers should be in prison.

No comment was immediately available from Debenhams.