Mike Ashley’s Sports Direct is backing a legal challenge against Debenhams’ restructuring plan to “drive it into administration so that it can pick up its assets on the cheap”, a court was told today.
The sports retailer is backing a challenge brought by Combined Property Control Group (CPC), which represents the landlords of six Debenhams stores, against the department store’s rescue deal.
If CPC wins the case, which began at London’s High Court today, the restructuring plan could unravel, tipping the retailer into administration.
In May the retailer secured the backing of its creditors to push ahead with a company voluntary arrangement (CVA) restructuring plan, which earmarked 50 stores for closure and approved rent reductions at more than 100.
Sports Direct, which owns rival department store House of Fraser, was Debenhams’ biggest shareholder before the company was taken over by a group of its lenders in a move that wiped out existing shareholders.
In written submissions to the High Court Tom Smith QC, representing Debenhams, said: “Sports Direct is not itself a landlord of any of the Company’s premises. And it can hardly be suggested that it is providing the funding and indemnification out of charity.
“It is obviously doing this because it thinks it is in its own commercial interests to do so.”
He added: “Sports Direct wants to drive its principal competitor out of business…it wants to drive Debenhams into administration so that it can pick up its assets on the cheap.”
City A.M. has contacted Sports Direct for comment.