The battle between Sports Direct and Debenhams has taken another twist with the sports retailer owned by Mike Ashley seeking to launch legal action against the department store group over its proposed rescue deal.
Sports Direct is talking to landlords and other groups about trying to stop Debenhams’ company voluntary arrangement (CVA) through court action.
CVAs are an insolvency mechanism that allow failing businesses to avoid collapse by reducing rents and breaking leases on some stores. The process has been opposed by landlords, who say that they have been forced into agreeing to rent cuts.
Sports Direct’s move is the latest salvo in the battle between the two. Sports Direct’s 30 per cent holding in Debenhams was wiped out when the department store was put into administration in April and then sold to its lenders.
Debenhams had rejected the offer of a £200 million cash injection from Sports Direct after its founder and majority shareholder, Mike Ashley, 54, had wanted to become chief executive.
Ten days ago creditors to the department store group voted 95 per cent and 97 per cent in favour of two company voluntary arrangements which will clear the way for what they hope will be a turnaround. Debenhams will close 22 of its 166 stores in the coming months, putting 1,200 jobs at risk, and cut rents on 105 more. About 50 of its stores will eventually close.
Creditors could still mount a legal challenge to the plan before June 6. A source close to Sports Direct confirmed that it is talking to a number of third parties — including landlords — with a view to making a joint challenge. The source said “the CVA votes . . . bear more resemblance to the presidential elections in North Korea than they do to a fair, open and honest process”.
Debenhams has struggled under debts that have reached £1.1 billion.