Debenhams (LON:DEB) has turned down the offer of a £40mln loan from Mike Ashley’s Sports Direct International PLC (LON:SPD) made in a letter from the billionaire published by the Daily Telegraph on Wednesday.
The letter, addressed to Debenhams CEO Sergio Bucher, suggests without the money the retailer "has zero chance of survival". Ashley also said he is frustrated Debenhams doesn't want his "help" but wasn't surprised "by the predictable negative response".
READ: Sports Direct stumbles as first-half profits plunge on House of Fraser costs
Debenhams, which confirmed to Reuters that the letter was authentic, said it had declined the offer as it “came with conditions that could affect the interests of other stakeholders.”
They said that while Debenhams board does not think it could accept the proposal, as presented, it has invited Sports Direct to engage as part of a broader refinancing process, Reuters added.
EXCLUSIVE: here’s the letter Mike Ashley sent Debenhams boss pic.twitter.com/a0B7kxFqhY
— Ashley Armstrong (@AArmstrong_says) 13 December 2018
Sports Direct which owns a near 30% stake in the struggling department stores group acquired its collapsed rival House of Fraser earlier this year, and talk has inevitably suggested a link-up between the two retailers.
Ashley’s firm’s reported interim results today which showed that losses from the HOF purchase contributed materially to a 27% drop in its first-half profits.
House of Fraser, which Ashley acquired from administrators for £90mln in August, has racked up losses of £31.5mln since it was subsumed.
Ashley said in the Daily Telegraph published letter: “November was the worst November for retailers in living memory.”
He added: “There isn’t any good news out there. In this context, I can’t see how our headline proposal to provide a £40mln interest-free loan and inject some additional equity could possibly be seen or portrayed as a negative in any shape or form.”
In October, Debenhams said it would close up to 50 of its underperforming stores, putting about 4,000 jobs at risk, after it reported a record full-year loss of nearly £500mln.