Court hears Mike Ashley wants to ‘eliminate’ Debenhams as competitor

The embattled department store chain won approval from landlords and creditors for its CVA earlier this year, but a challenge to the procedure was brought by landlords Combined Property Control Group (CPC), which opened in the High Court yesterday.

CPC’s challenge to the Debenhams CVA is being funded by Sports Direct, Ashley’s retail group which was previously the largest shareholder in the department store.

On the first day of the hearing, Debenhams’ barrister, Tom Smith QC, said the department store retailer believed Sports Direct was funding the challenge because it “wants to drive its principal competitor out of business”, according to the Press Association.

Smith also said Sports Direct wanted to drive Debenhams back into administration “so that it can pick up its assets on the cheap”, which “would be consistent with Sports Direct’s recent modus operandi”.

Debenhams’ barrister also said the involvement of Ashley’s retail group in funding the challenge was “highly unusual and a matter of significant concern”.

Controversial CVA

Sports Direct previously challenged the result of the CVA itself but dropped its legal action in July.

CPC argued that the CVA was “designed to create a situation in which the company’s general body of unsecured creditors is paid in full at the expense of certain landlords and local authorities” and “goes beyond the jurisdiction” set out in the Insolvency Act.

Over 90% of creditors approved Debenhams’ CVA proposal. However, if it loses the case brought it against it by CPC and fails to win an appeal, the retailer runs the risk of its CVA being blocked and falling into administration.

Retail Week understands that the court has ruled submissions of evidence from Sports Direct to be inadmissible.

In a statement issued by Debenhams before the hearing, a spokesman said: “We remain extremely confident this challenge is without merit and expect it to fail. In the meantime, we are progressing with our restructuring, which was approved by the vast majority of creditors, including over 80% of landlords.”