Sir David Jones, the chief executive of JJB Sports, is embroiled in an extraordinary row over revelations he borrowed £1.5m from billionaire Mike Ashley, the boss of rival sportswear chain Sports Direct and owner of Newcastle United.

The Sunday Times has obtained a letter sent by Ashley to Jones in February, in which he says the cash was sent to Jones’s account at HSBC in October 2007. The letter alleges the loan was made after Chris Ronnie, the former boss of JJB, approached Ashley to say that Jones was encountering temporary personal financial difficulties.

JJB and Sports Direct are not only rivals but have a close commercial relationship involving the trading of stock. The personal loan raises questions of possible conflicts of interest.

Ashley claims in the letter, dated February 24, 2009, that the loan was a short-term agreement due to be paid back by November 1 2008. The letter adds that because it was a short-term deal, Ashley was not intending to charge interest.

The loan was not repaid by the agreed date and was extended to January 31 — and still not repaid. Ashley says that a formal agreement was signed on March 1 in which Jones agreed to pay the loan back to Ashley with 2% interest by June 30 2010, or earlier.

This weekend a spokesman for Jones denied he had encountered difficulties and insisted Ashley lent Jones the money to raise funds for Advance Network Technologies, a software company.

A spokesman for Jones said he wrote to Ashley on October 15, 2007, thanking the billionaire for “helping out” with the software company and the cash would be used to “make an impact in the software market”.

They agreed the cash would be paid back or Ashley could convert the loan into ANT shares. Ashley denied the loan had any connection with ANT.

JJB is now finalising a £50m rights issue.

• Ashley will announce plans to scrap dividend payments to shareholders when Sports Direct publishes its full-year results this month. Analysts say the move will save £21m a year, which will be used to pay down debt.

• The Financial Services Authority has written to Chris Ronnie, former boss of JJB, to say that it has discontinued its investigation into a controversial share sale.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive