Sunday 19 May 2019 6:36 pm

Sports Direct mulls legal challenge over Debenhams rescue plan

Mike Ashley’s Sports Direct is looking to launch legal action against Debenhams over a controversial rescue deal secured earlier this month.

The sportswear group is set to challenge two company voluntary arrangements (CVA) that could lead to the closure of 50 the chain’s 166 stores, with rent cuts expected on dozens more.

Read more: Local authorities to be hit as Debenhams demands business rates cut

A source close to Sports Direct said the company is currently in talks with a number of third parties, including landlords, about a possible joint legal challenge.

“The CVA votes, with one receiving 95 per cent support and 97 per cent for the other, bear more resemblance to the presidential elections in North Korea than they do to a fair, open and honest process,” the source said.

It came as Ashley’s retail group issued a statement outlining “serious issues” with the department store chain’s CVA process.

Sports Direct criticised the turnaround plan and slammed a sale process run by Debenhams's owners, a consortium of the retailer’s lenders led by US hedge funds.

“This was a highly unusual sales process given the incredibly short and unrealistic timescales for a group and matter of this size and complexity, and was closed only hours before the CVA votes themselves,” the firm said.

Sports Direct also raised concerns about the department store’s plan to close its main distribution centre, leaving it with only one remaining distribution centre for its 100 stores.

“With an unprecedented turnout, the CVA proposals had overwhelming support from landlords,” a spokesperson for Debenhams said.

“Landlords voted heavily in favour – well above the 75 per cent majority required – and we reject any suggestion that the process was not run properly.”

A spokesperson for FTI, Debenhams’s administrator, said: “We are entirely satisfied that the sale process was robust and that the timetable was reasonable.”

Read more: Debenhams gets green light for CVA

The dispute is the latest twist in a long-running war of words between Mike Ashley and Debenhams.

The department store rejected a £200m takeover offer by Sports Direct, which was contingent on Ashley taking over as chief executive.