Now, the latest press release from the group addresses the criticism it has received over its debt arrangements with founder Mike Ashley. For a number of years, the group has been borrowing sums of money in region of £250m from a loan facility arranged with Mr Ashley separate to its debt facilities which were set up "with a number of banks". The reason for this, according to the company, is fairly sensible. If the company draws down its bank facilities by more than a third, it is subject to higher interest rates. The rate of interest charged by Mr Ashley and his associated company is roughly 50 per cent lower.
Bosses at Sports Direct admit this arrangement is "unusual" but it claims that this strategy has allowed them to save more than £1m in recent years. Borrowing requirements at Sports Direct are expected to grow in excess of £263m for the foreseeable future but, in order to avoid further criticism, the group has agreed it will no longer draw down from the facility arranged with Mr Ashley. The company has been quick, however, to point out that this will ultimately lead to an increase in borrowing costs.
