Sports Direct withdraws Debenhams CVA lawsuit, but will fund another

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Debenhams Sports Direct
// Sports Direct withdraws legal challenge pertaining to Debenhams’ CVA.
// However, it will continue to fund an ongoing challenge by Combined Property Control Group
// Sports Direct recently said it had “no intention of withdrawing its challenge to the Debenhams Group”

Sports Direct has withdrawn its lawsuit against Debenhams over its CVA, although it will still continue to fund an ongoing legal challenge from a property firm.

Debenhams confirmed that the Mike Ashley-owned retail company withdrew as parties to an outstanding challenge to the Debenhams’ CVAs.

This challenge was brought jointly by Sports Direct and Combined Property Control (CPC) Group, which owns the buildings of six Debenhams stores.

However, Sports Direct will not only continue to fund the CPC’s ongoing challenge, it has also reportedly agreed to bear any costs award that could be made against it at the conclusion of the challenge.

Debenhams said it would continue to defend CPC’s outstanding challenge as “being without merit”.

The news comes after Sports Directly said it had “no intention of withdrawing its challenge to the Debenhams Group”, according to The Times.

Meanwhile a third lawsuit by M&G Real Estate was dropped earlier this month after what Debenhams described as “positive, constructive discussions”.

“As Sports Direct has now acknowledged, it did not have sufficient interest to challenge the CVAs, as its businesses are not adversely impacted by the proposals and therefore had no legal basis for a challenge,” Debenhams chairman Terry Duddy said.

“However, by continuing to fund CPC’s challenge, Sports Direct is deliberately acting against the vast majority of Debenhams’ stakeholders, including the more than 90 per cent of our creditors who supported our CVAs.

“I call on CPC to withdraw its action, which we will vigorously defend.”

The Retail Gazette has contacted Sports Direct for comment.

In May, Debenhams’ CVA proposals received the support of the vast majority of its creditors – with 97 per cent and 94 per cent of them respectively voting in favour of the two proposals.

Creditors include landlords, banks and pension funds.

Debenhams highlighted that more than 80 per cent of landlords voted in favour of each CVA proposal.

The CVAs came about after the department store entered a pre-pack administration in April, which saw it fall into the control of lenders and wipe out its shares.

This caused Sports Direct, which was one of the retailer’s biggest shareholders with a near-30 per cent stake, to lose an estimated £150 million.

Debenhams’ CVAs will see it initially close down 22 of its 165 stores by January 2020, with the total growing to 50 afterwards.

Meanwhile, 30 will be downsized and rent reductions will be sought on more than 100 stores.

The process places thousands of jobs at risk, but Duddy said the restructuring plans were a “a vital step in preserving as many as possible” of the 25,000 staff across the retailer.

Last week, news emerged that Debenhams was seeking additional borrowing facilities of about £50 million as soon as this autumn to see it through the Christmas trading period.

The £50 million is in addition to the £200 million facility secured in March.

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