British tycoon lashes out as US funds invade UK retail crisis

Bloomberg

UK retail billionaire Mike Ashley is lashing out after losing a fight with US hedge funds over department store chain Debenhams Plc.
The retail magnate, who made British headlines for substandard working conditions at his sporting goods chain, has been blasting Debenhams management and making legal threats since lenders took control, wiping out his roughly 30 percent stake.
The loss by Debenhams’ largest shareholder and king of UK retail, who has led a crusade to protect Britain’s forlorn shopping districts from online competition, signals the extent of the sector’s debt crisis and the businessman’s bluster.
Ashley was outmaneuvered by lenders as he fought the company at every turn.
“Ashley played this badly wrong,” said Stephen Lienert, a credit analyst at Jefferies in London. “He could have bought Debenhams’ debt or sided with the lenders. He could have played it several other ways. Instead he went his own route and that was a massive mistake.”
Officials at Debenhams and Ashley’s Sports Direct International Plc declined to comment.

Leveraged Buyout
The problems at Debenhams, once one of Britain’s most-loved department stores, go back to a 2003 leveraged buyout led by private-equity firms CVC Capital Partners and Texas Pacific Group.
The buyers saddled Debenhams with debt and sold stores to pay themselves dividends.
The company has struggled to develop its online business as consumers shift purchases to Amazon.com Inc and other e-commerce providers. That’s claimed household names from department-store owner BHS to the British arm of Toys ‘R’ Us Inc.
Debenhams’s lenders Alcentra, GoldenTree Asset Management and Silver Point Capital will now seek to cut rents, close stores and convert some debt to equity to prevent the 241-year-old company from going under.
The private owners aren’t expecting to report first-half earnings as previously planned.
The lenders are likely to seek a type of restructuring known as a company voluntary arrangement in coming weeks to loosen expensive leases and are poised to appoint a turnaround specialist as chief restructuring officer.
Administrators have put Debenhams up for sale in the hope that a buyer will fully repay its $944 million of debt. That means Ashley could get back in, but he hasn’t made any public statements suggesting plans, and it would cost more than three times his highest previous offer.
“Ashley could walk away entirely and forget it, or buy it down the road if he believes the business will struggle, or write a big check today for it,” said Lienert at Jefferies.
The 54 year-old retail heavyweight has an empire that encompasses Debenhams’s rival department store chain House of Fraser, along with Sports Direct, Evans Cycles, Agent Provocateur and Newcastle United soccer club. He spent about 150 million pounds acquiring his stake in Debenhams, but was on the back foot with lenders since the funds and European banks extended a 40 million-pound lifeline. That secured funding gave them priority in debt talks ahead of unsecured lenders and shareholders.
The company rejected Ashley’s own 40 million-pound loan offer late last year because it came with strings attached.
Instead of buying Debenhams’ existing debt and playing hedge funds at their own game, Ashley followed a contradictory strategy of making offers to control the company while sparring with the board.