Debenhams shareholders facing wipeout as department store edges closer to securing £200m lifeline

  • Group expected to launch pre-pack administration if it gets money from lenders
  • The department store group's share price slumped by 45% on Friday  

Debenhams shareholders are facing wipeout as the department store edges closer to securing a £200million lifeline.

The department store is expected to launch a pre-pack administration if it wins the money from its lenders, – allowing them to seize control of the business.

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But Debenhams warned that the move would leave current shareholders with nothing – dealing a huge blow to retail tycoon Mike Ashley, who controls a 29.7 per cent stake worth £5.8million through his business Sports Direct. 

Shares slumped 45 per cent last night to just 1.6p amid fears they will soon be worthless.

Ashley, who is Debenhams' largest shareholder, wants take control of the department chain and add it to his sprawling retail empire.Last year he snapped up rival House of Fraser for £90million.

The 54-year-old has offered Debenhams a £150million interest-free loan if it will make him chief executive. But Patrick O'Brien, retail research director at Globaldata, said Ashley's attempt to buy Debenhams and merge it with House of Fraser now looks 'doomed to be an expensive failure'.

Neil Wilson, chief market analyst at trading platform Markets, said: 'Management is taking pretty drastic action here.

'Surely Ashley's admittedly bitter medicine would be an easier pill to swallow?'

After Debenhams announced the plans for a deal with creditors yesterday, Ashley hit back with an alternative offer to buy its Danish subsidiary Magasin du Nord for £200m in return for being made chief executive. 

However, a Debenhams spokesman said: 'As with all other proposals received to date from Sports Direct, it does not address the company's funding and restructuring requirement, while balancing the interests of all stakeholders. Further, there are obvious concerns with the proposal that Mike Ashley becomes chief executive of Debenhams given that Sports Direct owns our direct competitor House of Fraser.'

Debenhams is now worth just £19.6m, compared with £1.7 billion when it returned to the stock market in 2006. The retailer has been beset by problems – including a boardroom coup led by Ashley that led to the removal of Sir Ian Cheshire as chairman.

Chief executive Sergio Bucher was also removed from the board, but still runs the retailer. And last month Debenhams was forced to rush out a profit warning, its fourth since January 2018.

Analysts now expect the firm to make losses of £30m this year.

Debenhams' latest attempt to freeze out Ashley comes after the tracksuit tycoon launched a scathing attack on rival retail kingpin Sir Philip Green, as he dismissed reports he is looking to buy the billionaire's Arcadia retail empire. In a dig at Green, Ashley said he is not interested in acquiring Topshop and Miss Selfridge owner Arcadia.

Ashley told The Times: 'Let me be completely clear. I wouldn't buy any part of Arcadia either with Leonard Green or directly for a pound.'

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