Sports Direct boss Mike Ashley embarked on a last-ditch battle to take control of Debenhams today, accusing board members of dishonesty while offering to fund a rescue plan in return for the CEO's job.
Once the country's biggest department store, Debenhams has been hammered by a consumer shift online and to cheaper outlets, destroying 90% of its share value in the last year.
Ashley, who owns almost 30% of Debenhams, has stepped up efforts to take full control in recent months, forcing the chairman out of the company and the CEO off the board.
Having already offered to buy the group whole, Sports Direct today offered to underwrite a £150m rights issue in exchange for the CEO role for Ashley and a pledge by lenders to write off £148m of debt.
A person familiar with the situation said however that there was a lack of trust between the two sides, with Debenhams fearing that Ashley could renege on his investment offer once he had taken control.
If no solution can be found, Debenhams will fall into the hands of its lenders at the close of business today.
It will then likely be put into a so-called pre-pack administration which enables stores to keep operating while its lenders try to find a solution.
"Ashley becoming CEO is a major sticking point for the lenders, there is a major trust deficit here," the person said, declining to be named because the talks are private.
For its part, Sports Direct said Debenhams and its advisors had undertaken a "sustained programme of falsehoods and denials" and called on its board members Terry Duddy and David Adams to take a lie detector test.
The company added that Ashley had taken his own lie detector test, after the two companies clashed about events in a meeting.
"Mike Ashley's score for example was so significantly high as to be considered rare in comparison to others," the company said.
Laith Khalaf, a senior analyst at Hargreaves Lansdown, said the strings attached to Ashley's offer looked too much for the lenders to swallow.
"In theory a deal could be struck, but relations seem far from cordial, and the Debenhams management look set on giving the lenders control of the high street chain," he said.
Tracing its history back to 1778, Debenhams, a presence on most British high streets with its giant stores, has been battling to avoid the fate of collapsed rival BHS and House of Fraser.
It has launched a programme to close 50 of its underperforming stores, putting about 4,000 jobs at risk.
The billionaire owner of Premier League soccer club Newcastle United, Ashley made his fortune from building retailer Sports Direct into a dominant presence on the high street and online.
The 54-year-old businessman said in March he was willing to step down as CEO of Sports Direct if he could take an executive position at Debenhams.
Ashley has in recent years also pounced on other weak retailers, including department store chain House of Fraser and analysts have speculated that he could put the two together.
He could also use Debenhams' excess store space to sell the brands that he already owns.
As well as the underwritten rights issue, Sports Direct said it was also considering its options regarding the £61m takeover offer it made for Debenhams at the end of March.
The group has until April 22 to either make a firm offer or walk away.
A spokesman for Debenhams declined to comment.
