Debenhams seeks advice from Deloitte amid CVA court challenge

Debenhams administrators Deloitte CVA
Debenhams is being taken to court by Combined Property Control Group (CPG), which owns 6 of the properties Debenhams lets
// Debenhams drafts in advisers from Deloitte in case of legal challenge
// Debenhams won the approval of creditors in May to go ahead with a CVA
// 50 of its 166 UK stores were earmarked to close

Debenhams has drafted in advisers from Deloitte just in case it loses a legal challenge against its rescue plan, which could result in the retailer falling into administration.

The department store chain won the approval of its creditors, as well as most of its landlords, to go ahead with a restructuring in the form of a CVA back in May.

An estimate of 50 of its 166 UK stores were earmarked to close and rent cuts on other stores will be sought as part of the CVA.

However, Debenhams is being taken to court by Combined Property Control Group (CPG), which owns six of the properties Debenhams lets, claiming it was treated unfairly as its creditor.

Meanwhile, Deloitte is waiting to put contingency plans in place.

If CPG wins, the rescue deal could be unwound with Debenhams having to meet backdates rents at the old level.

“We remain extremely confident this challenge is without merit and expect it to fail,” a Debenhams spokesman said.

“In the meantime, we are progressing with our restructuring, which was approved by the vast majority of creditors, including over 80 per cent of landlords.”

CPG’s challenge is being supported by Mike Ashley’s Sports Direct, which dropped its own legal challenge against Debenhams in July.

Sports Direct had been Debenhams’ largest shareholder and attempted to gain control of the department store chain for months.

Ashley even staged a boardroom coup in January, unseating the retailer’s then-chief executive and chairman Sergio Bucher.

In April, lenders took control of Debenhams after it rejected a rescue offer from Sports Direct to inject £200 million into the business.

Sports Direct’s shares were wiped out in the process, as well as other shareholders.

Ashley had spent an estimated £150 million on his stake in the retailer.

Meanwhile, most of Debenhams’ UK stores are expected to stay open until after Christmas.

It recently parted ways with executive chairman Terry Duddy and replaced him with Stefaan Vansteenkiste, a turnaround specialist, as its new boss.

Moreover, CPG’s case will be heard in the Chancery division by Justice Norris.

The hearings are expected to last a few days and a verdict is expected to be announced in the next few weeks.

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