Debenhams is on the brink of falling into the hands of its lenders in a move that will wipe out shareholders after the company and its financial backers rejected a £150m cash injection from Mike Ashley’s Sports Direct.

A pre-pack administration deal is expected to be announced on Tuesday morning that would affect Debenhams’ holding company only, meaning its 165 stores would continue to trade. However, shareholders’ stakes will be rendered worthless, including Sports Direct’s near 30% stake, which cost about £150m to build up.

The retailer’s banks and bondholders also want Debenhams to close about 50 stores via an insolvency process known as a company voluntary arrangement, which is likely to follow within weeks. Landlords will hold a vote on whether to approve the deal, expected to involve stores closing after Christmas and putting thousands of jobs at risk.

Sports Direct said Debenhams had turned down its offer of a £150m rescue package, in the form of a fully underwritten rights issue, in a deal it hoped would keep the company in the hands of shareholders. In a stock market announcement on Monday afternoon after that deal was rejected, Ashley’s retail group said it was still considering making a fully funded takeover bid instead, but no offer had emerged by a 5pm deadline.

With the deadline missed, the most likely outcome for the chain, which has 165 stores and employs 25,000 people, is that lenders will take control of Debenhams. They have lined up administrators to organise a pre-arranged deal under which Debenhams’ listed holding company will go into administration. The group’s operating companies, which run its stores, will then be sold to a new entity controlled by the lenders in return for reducing the group’s £640m debt pile.

Debenhams has been battling for survival for months as it suffers from a slowdown in consumer spending, especially in physical stores. It has also been held back by having to service heavy debts, reducing its ability to invest in updating its stores and website to cater to changing tastes.

It is understood that lenders turned down Ashley’s offers of assistance partly because they were all conditional on him being made chief executive – a move they deemed unacceptable.

Ashley also wanted Debenhams’ lenders to write off £148m of the group’s debts, but lenders are understood to have been unwilling to take such a hit.

The Debenhams board’s rejection of Ashley’s offer came after hours of talks with the group’s lenders over whether to accept Ashley’s weekend offer to underwrite a rescue rights issue. Ashley’s retail group said it was disappointed with Debenhams’ response to its rescue plan, which would involve existing investors buying newly issued shares. By offering to underwrite the share issue, Ashley was guaranteeing that Debenhams would receive the full £150m.

“Sports Direct believes that, in the continued absence of [engagement] from the board of Debenhams and Debenhams’ lenders, there is a likely significant and negative impact on Debenhams’ current shareholders and other stakeholders, including suppliers and employees. Sports Direct therefore calls upon the board of Debenhams and its lenders to actively engage in negotiations.”

Last month, Debenhams’ board set a deadline of 5pm on 8 April for Sports Direct to either launch a fully funded bid, with the financial firepower to keep the business running and pay off its existing debts, or agree to underwrite a rights issue on terms agreeable to its lenders.

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Hopes of a deal were hit on Sunday when Sports Direct issued a scathing statement about Debenhams, accusing it of a “sustained programme of falsehoods and denials” over a non-disclosure agreement (NDA) which had prevented Ashley from buying up Debenhams debt or further shares.

In a highly unusual statement, Ashley said he and his colleagues had taken a lie detector test to “prove they were telling the truth” and suggested Debenhams’ interim chair, Terry Duddy, and non-executive director David Adams should also take such tests “to clarify their recollection” of a meeting about the NDA.