Sports Direct has called Debenhams’ pre-pack administration a “national scandal”, and called for the process to be reversed in favour of a “full, better and appropriate solvent solution”.
Chad Griffin, Simon Kirkhope and Andrew Johnson of FTI Consulting were appointed as joint administrators of Debenhams today, wiping out equity for shareholders including Sports Direct.
Only the plc part of the business has been placed into administration. The underlying group operating companies were immediately sold to a new company owned by Debenhams’ lenders and are continuing to trade as normal, including its 166 stores.
The pre-pack deal followed a bitter struggle for control between the Debenhams board and Sports Direct, which holds a 29.7% stake.
Sports Direct said today’s events were “disastrous, totally avoidable and represent the complete destruction of shareholder value”.
It claimed the pre-pack was “a long time in the planning”, and certain lenders outlined their intention to take control of the struggling department store in autumn 2018.
Sports Direct said it had been “stalled, dissembled to and misled by Debenhams and its advisers”.
It added: “Now the future of thousands of Debenhams employees, shareholders, pensioners, landlords and suppliers lie in the hands of the lenders, including off-shore-based hedge funds.
“This is nothing short of a national scandal – and one that could so easily have been avoided if Debenhams had chosen to engage with its largest shareholders constructively rather than obstructively.
“Sports Direct will not stop in its quest to get to the bottom of this appallingly managed process, and to find and hold to account those responsible for this final turn of events. This is a tragedy. There is no other way of putting it, especially when a long-term solution was there for the taking.”
Sports Direct CEO Ashley said: “As normal, politicians and regulators fiddled while Rome burnt. These politicians and regulators have proven to be as effective as a chocolate teapot. 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.
“While these hedge funds look to close a significant number of stores and put thousands of people out of work, as politicians and regulators look on, I will go to the ends of the Earth to save as many Debenhams stores and jobs as I can, similar to the promise I made with regards to House of Fraser. While there may be some short-term cost to Sports Direct and our shareholders, sometimes you have to do the right thing – something the board of Debenhams and the hedge funds have manifestly failed to do.
“I call on the authorities to reverse the administration process so that a full, better and appropriate solvent solution can be found. This solution would include allowing myself and appropriate senior Sports Direct management access to detailed information to save the business for all stakeholders. The board of Debenhams and its advisers have sought to stifle and exclude us from their so-called process, and have undermined and blocked our various offers of assistance as they carried out their underhand plan to steal from shareholders.”
Sports Direct tabled a last-minute £150m cash bid for Debenhams on the condition that Ashley was named CEO of the department store chain. Debenhams rejected the offer.
In the early hours of this morning, Sports Direct made a revised proposal to Debenhams, offering to underwrite a £200m pre-emptive equity issuance to existing Debenhams shareholders. However, Debenhams said the offer was “highly conditional” and that it was “not sufficient to justify an extension to the deadline [of 8 April, after which date it would enter a pre-pack]”.
Sports Direct: Debenhams pre-pack is a ‘national scandal’