Mike Ashley’s Sports Direct has fired off a legal challenge against Debenhams rescue restructure, which was approved by creditors last month.
The legal challenge is the latest blow by Ashley in his battle with the department store, which was taken over by a syndicate of banks and hedge funds it owed money. The deal thwarted an attempt by the Sports Direct boss to take control.
Sports Direct took part in the CVA vote as the retail group, which also owns the House of Fraser department store chain as well as a string of sports and fashion stores, was owed more than £500,000 by Debenhams at the time the CVA was tabled.
Debenhams plans to close at least 22 stores and force through rent cuts on many others under the restructure.
However, landlords and other creditors, such as clothing suppliers, approved the closures which form part of two company voluntary arrangement (CVA) deals that Debenhams’ new owners have said are necessary to prevent the business collapsing. A CVA is a type of insolvency procedure and Debenhams received 95% support for one plan and 97% for the other.
Terry Duddy, the Debenhams executive chairman, said: “We believe the challenges to the CVAs to be without merit and will vigorously defend them. Given the overwhelming support for the proposals from creditors, including over 80% of landlords, this is an unnecessary distraction as we implement our restructuring plans.”
A spokesperson for Celine UK NewCo 1 Ltd, Debenhams’ new owners, said: “We note the spurious challenges to Debenhams’ CVA proposals, which were approved by the vast majority of landlords and more than 90% of all creditors. We will move forward with our debt restructuring process as expected. The CVA provides a platform to deliver a turnaround in the business for which the lending group has committed £200m of new funding and remains supportive.”