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British retailer Debenhams falls into administration

Key Points
  • Fighting to defend his 30 percent stake before all shareholders are wiped out, Sports Direct boss Ashley made a midnight offer to underwrite a 200 million pound ($260 million) rights issue in exchange for him becoming CEO.
  • Debenhams, once Britain's biggest department store group, rejected the offer first thing on Tuesday.
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Debenhams' lenders took control of the ailing British retailer on Tuesday after it went into administration, wiping out shareholders including billionaire Mike Ashley in the latest corporate failure on the high street.

Once the biggest department store chain in the country, Debenhams has been battling with a sharp slowdown in sales, high rents and ballooning debt, plus an acrimonious battle with its largest shareholder, Ashley's Sports Direct.

While its stores will keep trading, the appointment of administrators marks the latest corporate failure in the British retail sector after House of Fraser, electronics firm Maplin and cycle shop Evans all struggled to stay afloat.

Administrators from FTI Consulting immediately sold Debenhams' holding company to a new entity owned by its lenders. Contracts with stores, staff and suppliers were held by its operating companies and will not be affected, it said.

The announcement marks defeat for the retail billionaire Ashley, who has spent months battling to wrest control of the business, offering a rescue plan that came with the condition he was appointed the chief executive.

"It is disappointing to reach a conclusion that will result in no value for our equity holders," Chairman Terry Duddy said.

"However, this transaction will allow Debenhams to continue trading as normal; access the funding we need; and proceed with executing our turnaround plans, whilst deleveraging the group's balance sheet."

Despite its long history, Debenhams has been battling for survival after a consumer shift online and to cheaper outlets destroyed 90 percent of its share value in the past year.

It currently has debt facilities worth 720 million pounds and a market valuation of 22 million pounds.

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