Debenhams is considering a pre-pack administration in a bid to prevent the struggling department store group from falling into Mike Ashley and Sports Direct’s grasp.
Debenhams has been in talks with lenders about securing £150m of funds as it battles to turn itself around, according to The Times.
The department store business is seeking to secure a funding deal before a meeting next month with Ashley.
The retail tycoon is Debenhams’ biggest shareholder and offered to bail out the retailer last week with a £150m loan in exchange for additional equity in the business.
The Sports Direct boss was already seeking to become chief executive of Debenhams and to oust most of the board.
The pre-pack is said to be one fall-back option during the hostile situation between Ashley and Debenhams.
Sports Direct has publicly accused Debenhams of misleading the market, claiming that its trading statement in January was “at best impossibly optimistic or at worst deliberately misleading”.
Debenhams, which denies misleading the market, has a £50m quarterly rent bill due by March 25.
One source close to the retailer said there was no concern about failing to meet its obligations to landlords and that its main focus was on refinancing its debt pile as soon as possible, according to The Times.
If the department store group manages to gain £150m from lenders, a pre-pack option may not be necessary because it will have time to look at other refinancing options for its remaining debt.
A pre-pack involves placing a company into administration then immediately selling it to a connected party such as a lender, while disposing of a chunk of debts.
The process does not require shareholder approval and could allow Debenhams to continue to trade as a new entity.