Debenhams PLC said March 14 its board will "give careful consideration" to an offer by Sports Direct International PLC to grant an up to £150 million unsecured loan in exchange for a 5% stake and appointment of Sports Direct Founder and CEO Mike Ashley as Debenhams' director and CEO.
The credit offer announced March 13 is Ashley's latest effort to gain control of Debenhams. On March 7, the British sports and leisure clothing retailer, which owns a 29.73% stake in Debenhams, requested a meeting of Debenhams shareholders to appoint Ashley as a director and executive at the company and remove the chain's most current directors.
With support from another major shareholder, Landmark Group, Sports Direct has already ousted Debenhams CEO Sergio Bucher and Chairman Sir Ian Cheshire from the board.
Under its loan proposal, Sports Direct would make a £150 million unsecured term loan of 12 months to Debenhams, of which a part would be used to repay Debenhams' £40 million loan, and the remaining £110 million would be available for general working capital.
Sports Direct said the loan would be interest-free if Debenhams issues a 5% shareholding to Sports Direct, but it would bear a 3% interest if shareholders reject the stake transfer.
A 5% stake transfer would raise Sports Direct's stake in Debenhams to 35%.
Sports Direct earlier said that if Ashley is appointed to the board of Debenhams, the executive would step down from his roles at Sports Direct.
In response to Sports Direct's loan proposal, Debenhams, which is looking for additional credit facilities from its current lenders, said any third-party loan offer would require both the consent of its revolving credit facility lenders and noteholders and material amendments to existing facilities.
Debenhams said the board "will engage with Sports Direct and other stakeholders regarding its feasibility in the interests of all parties."
Debenhams' shares closed down 5.59% at £3.21 on March 13.