Debenhams, whose suppliers have been hit by trade credit insurance cuts following profit warnings from the high street retailer, needs to do one thing if it wants to be rescued by its biggest shareholder.
Mike Ashley, whose Sports Direct has a 29% stake in the department store chain, is offering to underwrite £150 million of new equity funding in exchange for the top post at the firm. This isn’t the first time the chief executive position has been negotiated, but the cash injection proposal comes ahead of a likely administration deal with Debenhams’ lenders.
“Mr Ashley’s appointment would immediately relieve any pressure on the company’s supply chain and he would be in a position to lead the restructuring of the company’s stores and operations,” BBC quoted Sports Direct as telling Debenhams in a letter.
“Sports Direct remains keen to be a supportive shareholder and financier.”
Meanwhile aside from the CEO role for Ashley, according to the report, Sports Direct is also asking that lenders write off £148 million of Debenhams’ debt.
In 2018 trade credit insurers such as Euler Hermes and Atradius were said to have withdrawn cover from suppliers amid income woes at the British enterprise. Earlier this year Moody’s VP – senior credit officer David Beadle said the agency believes that there is a risk that refinancing negotiations may not result in a timely and cost-effective solution for Debenhams.
