MIKE Ashley’s bid to add Debenhams to his high street empire looks to have been dealt a fatal blow after the embattled department store chain moved closer to being placed in the hands of its bondholders, sending its already-depressed shares tumbling.

Debenhams, which has been battling to shore up its balance sheet amid grim trading conditions on the high street, signalled yesterday that it has won approval from bondholders for a series of proposals to ease its liquidity crisis.

It paves the way for the board to raise a further £200 million from existing lenders and note holders and pursue a range of radical restructuring options. And while Debenhams has not disclosed what those options would be, it warned the City last week that “certain of these options – if they materialise – would result in no equity value for the company’s current shareholders”.

That could result in retail supremo Ashley – Debenhams’ biggest shareholder with 29.7 per cent built up through Sports Direct – seeing his investment wiped out.

Such an eventuality would be a bitter blow to Ashley, who has ramped up the pressure on the Debenhams board in the last week in a bid to take full control of the struggling group, having tabled a possible offer on Thursday.

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Laith Khalaf, senior analyst at stockbroker Hargreaves Lansdown, said it was now “difficult to see where he [Ashley] goes from here” in his long campaign to add Debenhams to his ever-expanding retail empire, which includes House of Fraser. “Unless there is an administration event where certain assets are being sold off... it is hard to see how he can wrest control of Debenhams,” Mr Khalaf said.

He added: “The board have ostensibly sided with the lenders. Today’s announcement... is effectively saying [the negotiations are] almost over the line. It is basically the lenders taking control of Debenhams, and that comes probably to the detriment of Mr Ashley.”

Mr Khalaf noted there was “never any level of certainty that 5p [per share] was going to be delivered for Debenhams shareholders" from Sports Direct's possible offer.

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Sports Direct had said on Wednesday it was considering making a bid for the shares it does not already hold, with a possible cash offer which valued the chain at £61.4m. That came on the heels of an offer by the sportswear chain to purchase the retailer’s Danish business, Magasin Du Nord, for £100m. The proposal was conditional on Ashley becoming chief executive of Debenhams.

The Debenhams board has resisted Ashley’s overtures, however, and has instead been focusing on negotiations with bondholders to increase its debt facilities, paving the way for a restructuring.

And yesterday it announced a breakthrough in the talks, confirming that a majority of holders of Debenhams 5.25% senior notes have provided consent to the amendments sought.

In a series of proposals, contained in a consent solicitation to bondholders issued on March 22, Debenhams sought to secure new money facilities of up to £200m from existing lenders and noteholders.

Debenhams, whose existing bondholder debt stands at £225m, said then that a successful consent solicitation would allow it to pursue a range of restructuring options to “secure the future of the business”.

However, Debenhams warned that “certain of these options… would result in no equity value for the company’s current shareholders”.

Among the options believed to be under consideration are a debt-for-equity swap and a pre-pack administration, with the latter expected to be more likely as it does not require shareholder approval.

Both options would result in existing investors losing their holdings in the company. It is also thought that a company voluntary arrangement (CVA) could be explored, involving store closures and talks with landlords to secure rent reductions.

While Mr Khalaf observed that Debenhams has yet to indicate which restructuring options it will pursue. A debt for equity swap and a CVA are options that “spring to mind”, he said, but noted that this is "a level of disclosure we have not had from the company.”

He said: “Once this refinancing is done, we would expect them to come forward with something.”

Debenhams previously announced in October its intention to shut 50 stores – around one-third of its total – to slash costs, putting 4,000 jobs at risk.

Shares closed down 25% at 2.09p.