DEBENHAMS’ rescue deal with landlords to cut rents and close 50 stores is legal, a judge has ruled.
Commercial landlords funded by Mike Ashley’s Sports Direct had taken the department store to court, claiming the terms of the insolvency process known as a Company Voluntary Arrangement (CVA) were unfair.
But Justice Norris told the High Court that four of the five grounds for appeal had failed, and criticised the behaviour of Sports Direct for personal attacks on the integrity of Debenhams’ directors.
Ashley had previously called for Debenhams’ advisers to “go to prison, given their skulduggery in undermining shareholders and other stakeholders, such as employees and pensioners” after the company refused his offer of a £150 million loan in return for him becoming chief executive.
He said Debenhams “seriously considered” accepting the funds but believed the conditions – including installing Ashley as boss – were “too onerous or impossible to fulfil” especially because Sports Direct owned rival House of Fraser.
The judge added that it was “entirely plausible” that Ashley wanted to buy Debenhams to get “an advantageous price” or “the elimination of a competitor to House of Fraser”, which the business tycoon bought last year.
He also said it was plausible that Ashley went to court “to pursue his grievance at the manner in which his attempt to acquire Debenhams pre-administration was frustrated”.
In his judgment, Mr Justice Norris added that Sports Direct’s arguments that Debenhams had been influenced by a desire to prefer other creditors “did not have legs” and praised Debenhams finance chief Rachel Osborne as a “transparently honest and careful witness”.
“Dealings were also constrained by the reluctance of Sports Direct to sign up to a non-disclosure agreement” before looking at Debenhams’ accounts, he added.
Debenhams welcomed the judgment, adding the CVA will continue to be implemented.
Chief executive Stefaan Vansteenkiste said: “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.”
Sports Direct was approached for comment.
The applicants will be allowed to appeal and submit short written statements to the court.
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