Debenhams PLC (LON:DEB) said it is in advanced talks with lenders for a £150mln lifeline as Sports Direct’s Mike Ashley tries to take charge of the struggling department store chain.
The company said £40mln of the loan would be used to refinance a bridge facility announced in February to ease restrictions on its existing £286mln net debt.
READ: Debenhams “disappointed” with Mike Ashley’s latest grab for power
Last week Ashley unveiled a plan that would see him leave Sports Direct and take the helm of Debenhams.
Sports Direct is a major shareholder in Debenhams with a 29.7% stake in the group.
Ashley proposed sacking all of Debenhams’ board members except for chief financial officer, Rachel Osborne, and appointing himself to an “executive role”.
He has requisitioned a general meeting where shareholders will vote on the proposals.
Debenhams said it was disappointed by Ashley’s attempt at a boardroom power grab and was looking at its options to strengthen its balance sheet.
Ashley announced his plan after the retailer issued a profit warning earlier the same week, blaming macroeconomic uncertainties, increased financing costs, and additional working capital needs.
READ: Debenhams sinks as it throws out January profit guidance
It marked the fourth profit warning from the chain in the last 15 months, having issued three in 2018 as high street retailers continue to suffer from a shift online as well as a consumer spending squeeze.
In morning trading, shares rose 1.5% to 3.59p.
Analysts at Peel Hunt said: "While the frequency of updates has moved up a notch following the recent moves by Mike Ashley to oust the current board at a forthcoming extraordinary general meeting, we still expect the solution to be driven by a company voluntary arrangement (CVA) and wider balance sheet restructuring, which will involve some form of highly dilutive equity fundraise."
A CVA -- a type of insolvency process that allows a business to close stores and negotiate lower rents on remaining sites -- has been carried out by a number of retailers in the past year including New Look, Carpetright, Mothercare and House of Fraser.