Sports Direct issues legal threat over Debenhams
Sports Direct’s row with Debenhams continues. The acquisition-hungry group, which described Debenhams’ takeover by its lenders as a “national scandal”, has threatened to take legal action against the administrators behind the deal.
Sports Direct owner Mike Ashley and other Debenhams investors saw their equity in the department store wiped out on Tuesday after the company was sold to its lenders in a pre-pack administration. Ashley had a near 30% stake in the business.
The deal was agreed with Debenhams’ banks and bondholders in return for cutting its £600m debt pile. Sports Direct had previously offered Debenhams to underwrite a £200m share issue as part of a rescue package. But the offer was conditional to Mike Ashley becoming CEO and Debenhams shareholders rejected the bid.
In a letter sent to FTI Consulting seen by the Guardian, Sports Direct has now complained that Debenhams’ joint administrators had a conflict of interest while representing the collapsed retailer. This is because FTI had engaged with the same lenders who now own Debenhams prior to its administration, Sports Direct alleged. The company is calling for the insolvency process to be reversed or face “further action”.
“[Sports Direct] will do everything available to it to unwind the damage caused to the company and other stakeholders (including large and small shareholders) by the events of today including but not limited to challenging the appointment [of FTI as administrators] and all consequences of it,” the letter said.
Sports Direct said FTI was unable to independently perform its duties as it had previously arranged a sale of Debenhams’ operating companies to the same creditors before it entered administration.
“We understand that Sports Direct as a shareholder will be disappointed that there is no value in the equity. However, the transaction delivers continuity for all group operations and was in the best interests of the group’s creditors, employees, customers, pension holders and suppliers,” FTI Consulting said on Wednesday.
Debenhams is one of the UK’s largest department store chains with 165 stores. But the future of those shops remain uncertain as the company is expected to launch a company voluntary agreement (CVA) in the coming weeks.
The new owners are also understood to be in talks with one of Europe's most experienced turnaround executives, Stefaan Vansteenkiste, for the role of chief restructuring officer, according to Sky News. His appointment is expected to be announced by the end of the week.
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