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Mike Ashley’s Sports Direct has launched a last-minute legal challenge to Debenhams’ restructuring plans.
Debenhams rejected two last-ditch takeover offers from Sports Direct before the keys to its shops were handed over to its lenders.
Now Sports Direct has turned to the courts in a bid to overturn a company voluntary arrangement (CVA) that would see Debenhams closing 50 stores.
Debenhams has called the challenge “spurious”.
A CVA is an insolvency process that allows a business to reach an agreement with its creditors to pay off all or part of its debts.
Sports Direct mounted its complaint on Monday night, just hours before a standard 28-day window to appeal against the CVAs expired.
It followed a decision by Debenhams’ creditors on 9 May to try to improve the fortunes of the department store chain by closing as many as 50 shops and aiming to reduce rents on up to 100 more.
Before Debenhams’ lenders took control of the firm, Sports Direct had been a major shareholder in the retailer, with about 30% of the firm’s shares.
That stake cost about £150m to build up but was wiped out when ownership in Debenhams was transferred to its lenders.
Mr Ashley subsequently described the Debenhams takeover by the lenders as a “national scandal”.
In a statement on Tuesday, Debenhams confirmed that Sports Direct was one of a number of firms to have challenged the CVA.
The firm’s executive chairman, Terry Duddy, 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.”
‘Spurious challenges’
A spokesperson for Celine, the consortium of Debenhams’ lenders that now owns the chain, 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.”
“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.”
Debenhams is the biggest department store chain in the UK with 166 stores. It employs about 25,000 people.
Sports Direct did not immediately respond to a request for comment