// Sports Direct reportedly preparing a legal challenge against Debenhams
// It argues that the CVA process had “serious issues” along with an “unusual” sales process of the department store
// Sports Direct was once Debenhams’ biggest shareholder, which was wiped out when the retailer fell into the hands of a consortium of lenders
Tensions between Sports Direct and Debenhams are far from over, with Mike Ashley’s retail company reportedly mulling a legal challenge against the department store over its CVA.
According to City AM, Sports Direct has been in talks with a number of third parties, including landlords, about a possible joint legal challenge against Debenhams.
Debenhams’ CVA, which was given approval from creditors earlier this month, aims to shut down 50 stores and slash rents on 105 others. It currently has 165 stores.
Twenty-two stores will close by January 2020, while the remaining 28 to eventually close down afterwards.
The process will place 1200 jobs at risk of redundancy across Debenhams and comes after a tumultuous period for the department store retailer.
The threat of a legal challenge follows a statement from Ashley’s retail group that alleged “serious issues” with Debenhams’ CVA process.
Sports Direct slammed both the CVA turnaround plan and the “unusual” sale process run by Debenham’s owners, a consortium of lenders led by US hedge funds that goes by the name Celine.
Ashley’s retail company also raised concerns about Debenham’s plan to shut down its main distribution centre, leaving it with only one warehouse when its portfolio is eventually reduced to 115 stores.
Debenhams said the votes in favour of its CVA were a majority “significantly above” the required threshold of 75 per cent on each proposal.
“With an unprecedented turnout, the CVA proposals had overwhelming support from landlords,” a Debenhams spokesperson said.
“Landlords voted heavily in favour – well above the 75 per cent majority required – and we reject any suggestion that the process was not run properly.”
Before Debenhams fell under the ownership of Celine, Sports Direct was the department store’s largest shareholder with a stake of 29.7 per cent.
Celine took control after Debenhams fell into administration in April, wiping out the equity of all of its shareholders.
Prior to that, the department store had rejected several rescue attempts from Sports Direct and Ashley – including a £200 million takeover bid – which was contingent on the billionaire tycoon taking over as chief executive.