Sports Direct has withdrawn its lawsuit against Debenhams over its Company Voluntary Arrangement (CVA), although the department store chain will still continue to fund an ongoing legal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”.
Meanwhile, a third lawsuit by M&G Real Estate was dropped earlier in July 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% of our creditors who supported our CVA. I call on CPC to withdraw its action, which we will vigorously defend.”
In May, Debenhams’ CVA proposals received the support of the vast majority of its creditors – with 97% and 94% of them respectively voting in favour of the two proposals.
Creditors include landlords, banks and pension funds.
The CVA 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, one of the retailer’s biggest shareholders with a near-30% stake, to lose an estimated £150 million.
Debenhams’ CVA will see it initially close down 22 of its 165 stores by January 2020; 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.