Debenhams on brink as 11th hour offer from Mike Ashley spurned

Debenhams has taken a step closer to falling into the hands of its lenders after a revised last-ditch offer from Mike Ashley was spurned.

The struggling 240-year-old department store chain said an improved £200m offer - announced in the early hours - to underwrite a rights issue was not enough to persuade lenders to give it more time as it seeks new finances.

Debenhams said it would make a further announcement later on Tuesday. Shares were suspended shortly afterwards.

The department store chain, which has 165 UK stores, is on the verge of entering a so-called pre-pack administration as part of its deal with lenders to keep it afloat.

But Mr Ashley, whose Sports Direct empire owns 30% of Debenhams, has been battling to avoid such an outcome, which would see this stake wiped out.

Debenhams has spurned a series of offers from the tycoon - all of them conditional on him being installed as its chief executive - including a possible £61.4m takeover and a plan over the weekend for Sports Direct to underwrite a £150m rights issue for the department store chain.

Mr Ashley upped the ante again in the early hours of Tuesday morning, offering to underwrite a rights offer - a way of raising cash from shareholders - to the tune of £200m instead.

The offer was conditional on lenders agreeing to write off £82m of its £720m debt mountain - less than Mr Ashley had previously asked for.

But in a statement to investors hours later, Debenhams said its lenders had confirmed that this was "not sufficient to justify an extension" to Monday's refinancing deadline for the business.

It said that "milestones relating to a potential transaction" with Sports Direct had not been met and that therefore a tranche of financing it needs to keep afloat will only be available if its operations transfer to the lenders.

Debenhams said this would "ensure the stability and continuing trading of the group's operating subsidiaries, with no disruption to the group's business, customers, employees, pension holders, suppliers or operations".

But it would mean current shareholders being wiped out.

Efforts to thrash out a deal between Sports Direct and Debenhams descended into acrimony over the weekend as Mr Ashley's business suggested that members of the department store's board should take lie detector tests over a disputed meeting, and accused the directors of "a sustained programme of falsehood and denials".

Debenhams declined to comment on the statement.