DEBENHAMS has been placed into administration and the retailer's lenders have seized control of the company.
Sports Direct's £150 million rescue offer for Debenhams had earlier been rejected.
The company has a major store in Chester, Browns of Chester, and one at the Coliseum Shopping Park in Ellesmere Port.
The last-minute rescue package promised to underwrite a £150 million rights issue, on the condition that Mike Ashley be made chief executive of Debenhams.
In a statement to the market on Monday afternoon, 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.
Mr 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.
Over the weekend Mr Ashley tore into Debenhams executives, calling on Sunday night for the board of the struggling high street chain to be investigated, two members to undergo lie detector tests, and trading in its shares to be suspended.
Browns of Chester, on Eastgate Street.
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, Mr Ashley claimed 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 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".
Mr Ashley has a near-30% stake in the department store but faces wipeout if it presses ahead with a £200 million refinancing plan announced in March.
Under the proposal, £101 million is to be drawn down immediately to allow restructuring, which will include store closures and rent reductions.
The other £99 million would have been made available if Sports Direct - or any other shareholder with a stake of more than 25% - fulfilled one of two conditions by April 8.
One option allowed Mr Ashley to make a takeover offer which included arrangements to refinance the group's debt.
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