Your money’s no good here: Sports Direct spurns Mike Ashley cash
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Version 0 of 1. The billionaire businessman Mike Ashley will no longer loan cash from his personal fortune to Sports Direct, where he is majority shareholder and board member, in an attempt to quell criticism. The decision by Mr Ashley will cost Sports Direct around £1m as the company will be forced to turn to traditional lenders and will not enjoy the lower interest rates he provided. Previously, the FTSE 100 company – which could be dumped out of the blue chip index due to recent poor results – had used a £250m loan facility from Mr Ashley. However, the company said yesterday: “It has been decided that it is in the best interests of the Group and its shareholders to avoid further criticism at this time.” It means a revolving credit facility with several banks will increase to £788m, incurring higher interest costs. Sports Direct said that Mr Ashley, through an investment vehicle called MALF, which is owned by the businessman’s Mash Holdings, charged about 50 per cent less interest than traditional banks, which had saved the company about £1m in costs. According to the company’s annual report, it borrowed £40m from Mr Ashley on 6 October 2014, repaying it 14 days later. The money was used to pay off £6.7m of bank loans and overdrafts, along with £200,000 in interest on “other loans”. In 2014 and 2013 the company paid £600,000 interest to MALF. The company’s critics have argued that the loan arrangement could be open to abuse, especially since Sports Direct already has such a high credit facility with banks already in place. Last year the company was accused by MPs of acting like a “back street outfit” in relation to boardroom decision making over the collapse of fashion chain USC. Many in the City have lost patience with the company over Mr Ashley’s sometimes baffling decisions, including using the company as a vehicle for setting up complex share deals with rival retailers. It also followed a shock profit warning last year. Sports Direct’s business practices have also faced criticism, after it emerged that workers in its warehouse were forced to undergo daily security searches, meaning they essentially earned less than the minimum wage. The company has since said the practice has ended and a 15p an hour pay rise was introduced across the group. Mr Ashley has also invited MPs from the Business Select Committee to tour his warehouse, although the politicians are also keen for him to appear publicly in Westminster to explain his business practices. |