Sports Direct eyes legal challenge over Debenhams CVA

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Sports Direct Debenhams
(Image credit: Ben Birchall/PA Wire)
// 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.

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2 COMMENTS

  1. He may well have a legal argument on the basis that there was a misrepresentation to investor’s by selling the chain to it’s lenders therefore making the investor’s take all of the loss.

    I do question the logic of the CVA process. Debenhams are shutting 5 Kent stores out of the 22 that don’t lose that much money. Kent isn’t that poor it just seems a very high figure that will leave them with very patchy coverage.

    I am surprised the Canterbury store is shutting though the rent is rumoured to be £1.3m given this is a very high grossing tourist location where there is a big spend.

    Historically there have always been two stores in East Kent it will be one from next January at WWC.

    Debenhams closure of the Ashford store seems strange given it’s a modern store and it would have been profitable without the Canterbury and Folkestone stores remaining open.

    I don’t think the lenders have a plan here.

    It does seem a very lopsided closure process for the CVA.

    I do think Ashley who I am not a fan of does have some leverage to say investor’s like him were misrepresented and made to suffer the loss unfairly ( under duress).

    It will be interesting to see if he wins or not. I would also be interested to see if he picks up the ex Debs stores for his Frasers brand as the Canterbury location would be a great store for that purpose but it seems the landlords are already preparing for life after Debenhams with leisure featuring in Folkestone store, and the Canterbury primarily residential though that is already leading to retailer’s like Jigsaw marketing their store for a get out clause in anticipation of the closure of Canterbury’s store.

    Debenhams has a problem that it sold freehold stores to MBA and over expanded as the internet was kicking in.
    It’s clothes are 20 years out of date for both women and men who dresses like the 1990’s I mean Jeff Bank’s is so yesterday.

    It doesn’t have a USP only beauty and home are it’s successes.
    I will be sorry to see most of the Debs stores go in East Kent but I think there will be alternative uses for them though I would like Canterbury’s to remain as a department store.

  2. I am a shareholder in Debenhams and am concerned that there was no satisfactory response from its management in considering fairly the take over bid by Sports Direct. I do hope that Sports Direct who owns almost 30 per cent shares in Debenhams and Mr. Ashley will consider legal fight to win the arguments. The shareholders should have been rewarded equal to the take over bid offer.

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