The Financial Times said on Monday that Chris Wootton, who has been lined up to replace billionaire Mike Ashley as chief executive of Sports Direct should the founder step aside to run Debenhams, told the newspaper that while the administration was “not the outcome we want”, it was a distinct possibility.
Sports Direct, which last year bought House of Fraser after it fell into administration, is the biggest shareholder in the troubled department store group, with a 29% stake.
Debenhams’ management is currently trying to refinance its borrowings and push ahead with a company voluntary arrangement (CVA) to close 50-60 stores after a string of profit warnings.
Last week, Sports Direct put forward its own refinancing proposal, offering to lend Debenhams £150mln interest-free and with no security if the department store chain agreed to appoint Ashley as chief executive.
Holders of Debenhams’ £200mln unsecured bonds are also thought to be considering a “pre-pack” administration of the department stores group that would hand control to lenders without requiring shareholders’ assent, the Financial Times said.
Wootton, who is currently Sports Direct’s deputy chief financial officer told the newspaper: “We’ve put £150m into the (Debenhams) equity, now it’s a penny stock.”
He added: “We’d rather have the share price go back to where it was. It can be pulled back from the brink if immediate action is taken.”
Sports Direct has already written down £85mln of its investment as Debenhams’ share price has plunged.
In mid-morning trading on Monday, Debenhams shares were 1.7% lower at 3.23p, while Sports Direct shares were flat at 288p.