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The High Court has rejected the legal challenge against Debenhams proposed CVA, which was funded by Mike Ashley’s Sports Direct.
The challenge was made by the Combined Property Control Group (CPC) – the landlord of six Debenhams stores in England as it argued 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”.
Sports Direct dropped its own legal challenge in July, but continued to financially back CPC’s efforts.
However, the High Court has ruled in favour of Debenhams claiming that its CVA proposal “continues to be effective”.
The challenge was rejected on four of the five grounds of the challenge, with the remaining ground addressed by Debenhmas by the deletion of a technical provision of the CVA relating to landlord forfeiture.
The news comes after Debenhams went under the control of its lenders when it entered a pre-pack administration in April. Debenhams Group Holdings Limited, its subsidiaries and certain dormant companies, which together make up the Debenhams Group, were transferred to the ownership of Celine UK NewCo 1 Ltd.
The administration followed Debenhams’ rejection of Sports Direct’s offer to underwrite £150m equity issuance. The decision also saw Sports Direct’s 30% stake in the department store wiped out
Stefaan Vansteenkiste, Debenhams’ CEO, said: “We are delighted that the court has today confirmed that our CVA is effective and will continue to be implemented as planned. We note that the only aspect that the judge required to be adjusted was a technical provision of the CVA relating to landlord forfeiture provisions.
“Our proposals had unprecedented levels of support from our landlords and today’s outcome is good news for our 25,000 employees, our pensioners and suppliers. We retain the support of our lenders, and everyone at Debenhams can continue to focus on trading ahead of the important Christmas period.”
Debenhams is now free to press of its plans which will see the closure of more than 20 stores.
