Sports Direct, which dramatically ousted the chairman of Debenhams on Thursday, has accused the department store’s directors of “dereliction of duty” for turning down a £40m interest-free loan offered by the sports chain before Christmas.
In a letter to the chair of the housing, communities and local government select committee of MPs, published on Friday, Sports Direct said: “If Debenhams does fail, the responsibility for that will rest solely with the Debenhams board.”
It said its offer of a £40m interest-free loan before Christmas had been made in “good faith and the board may want to reconsider … whether turning down our latest offer of assistance was a dereliction of duty”.
Debenhams, which has net debts of £286m, is in talks with its bankers about refinancing before its current loan facilities expire next year. The group urgently needs to find a new way to raise cash after halting the planned sale of its Danish Magasin du Nord chain when it failed to receive strong enough offers.
Debenhams said it had not ruled out any options, including an insolvency process that could speed up a plan to close up to 50 of its 165 UK stores over the next five years.
However, the company turned down the £40m loan from Sports Direct because it came with a demand for security over some Debenhams’ assets that would have given Ashley’s company a preferential position over other shareholders.
Sports Direct also demanded the right to add another 10% to its shareholding without making a formal takeover bid for the whole company. Under Takeover Panel rules anyone with more more than 29.9% must make a bid for the whole company. Debenhams feared such an agreement would give Ashley control of the company on the cheap.
On Friday Debenhams said: “As stated in December, we welcomed Sports Direct’s stated intention to demonstrate their willingness to support Debenhams. Because the offer came with conditions that could affect the interests of other stakeholders, the board felt it could not accept the proposal.”
Becoming a major lender to Debenhams could be helpful in the Sports Direct founder Mike Ashley’s aim to build a closer relationship between it and his struggling House of Fraser department store chain – which Sports Direct bought out of administration in August.
Debenhams has already been weakened by the ousting of its chairman and chief executive from the boardroom on Thursday after major shareholders Sports Direct and Dubai-based retail billionaire Micky Jagtiani’s Milestone Resources voted against them at the retailer’s annual shareholder meeting.
The chairman, Sir Ian Cheshire, stepped down immediately while the chief executive, Sergio Bucher, will stay on but not as a director.
The Guardian has learned that the Debenhams’ interim chairman, Terry Duddy, met Sports Direct’s Ashley soon after the meeting and held “constructive” talks on how to move forward.
Cheshire, who is understood to have had a difficult relationship with Ashley, did not announce his resignation at the meeting as advisers attempted to persuade Jagtiani to change his mind right up until the final vote was held.
Sports Direct has not commented on its reasons for voting against Cheshire and Bucher.
However, the letter to the parliamentary committee published on Friday made its frustrations clear, pointing out that Sports Direct had already written off in excess of £100m over its investment in Debenhams.