Debenhams deadline looms for Ashley

“Investors were in a cautious mood at the start of the new trading week with declines in some of the key stock markets around the world.

“In the UK, the FTSE 100 slipped 0.1% to 7,437 with gains from miners and insurers failing to offset weakness from housebuilders and pharmaceutical companies. Japan’s Nikkei index fell 0.2% as investors took profits following the recent rally in the country’s shares.

“Among the select few indices to rise, Hong Kong’s Hang Seng advanced 0.3% and Germany’s DAX moved 0.2% higher.

“Key events this week include the latest European Central Bank meeting on Wednesday and an EU summit to decide on a possible further delay to Brexit beyond this Friday,” says Russ Mould, Investment Director at AJ Bell.

Debenhams

“Mike Ashley could face a tricky decision very soon if the Debenhams board continue to ignore his rescue bid.

“You might think the retail kingpin holds all the cards in his battle to secure control of the department store chain given its precarious financial position and the fact he owns nearly 30% of the business.

“However, the colourful language Ashley used at the weekend over lie detector tests for Debenhams executives and the fact he has proposed two alternatives, either taking over the company for 5p per share or underwriting a big share placing, is an indication of the time pressure he is under.

“The refinancing plan agreed with its lenders effectively has a deadline of close of play today. It looks like Ashley faces the unpleasant choice of backing down on demands such as being made chief executive of the group and ousting the current board or letting the lenders take charge and being wiped out entirely.

“Ashley’s no-nonsense approach to business has likely been a significant factor in the creation of his retail empire. But Debenhams might have been a case where a more softly-softly approach would have yielded greater success.”

These articles are for information purposes only and are not a personal recommendation or advice.