The rescue package promised to underwrite a £150m rights issue, on the condition that Mike Ashley be made chief executive of Debenhams.
In a statement to the market, Sports Direct said its proposal had been rebuffed and called for the Debenhams board and its lenders to actively engage in negotiations to save the chain.
Ashley was previously given a deadline of 5pm on Monday to fulfil one of two conditions to prevent Debenhams from falling into the hands of lenders.
If neither is fulfilled, the retailer is likely to go into a pre-pack administration, wiping out Sports Direct’s near-30 per cent stake and all other shareholders.
On Sunday night the maverick billionaire called for the board of the high street chain to be investigated, two members to undergo lie detector tests, and trading in its shares to be suspended.
As well as accusing Debenhams bosses of “a sustained programme of falsehoods and denials”, the sportswear chain founder added that in a meeting “misrepresentations were made to induce Sports Direct into signing a non-disclosure agreement, locking them out of any ability to trade in the bonds or equity of Debenhams for a period of time”.
In an extraordinary outburst, Ashley claimed that he and two colleagues subsequently took lie detector tests, with the results showing “without any doubt” that they were telling the truth in their recollection of the meeting.
Sports Direct has now called for Debenhams interim chairman Terry Duddy and non-executive director David Adams to take their own lie detector tests to “clarify their recollection of this meeting”.
Ashley has a near-30 per cent stake in the department store group but faces wipeout if it presses ahead with a £200m refinancing plan announced in March.
Under the proposal, £101m is to be drawn down immediately, in order to allow restructuring, which will include store closures and rent reductions.
The other £99m would have been made available if Sports Direct – or any other shareholder with a stake of more than 25 per cent – fulfilled one of two conditions by 8 April.
One option allowed Ashley to make a takeover offer which included arrangements to refinance the group’s debt.
Alternatively, he had to call off an emergency meeting he requested to install himself on the retailer’s board and commit to either providing funding for the business or underwriting the issue of new shares.