By guest author Elias Jahshan from Retail Gazette
- Appeal period for a landlord legal challenge has concluded in Debenhams’ favour
- The appeal was brought forward by CPC, after their initial challenge was rejected by the High Court in September
- The news means the means the entirety of the CVA challenge process is now concluded
Debenhams has announced that all relevant procedural matters dealt with at a CVA legal challenge hearing in February have concluded in its favour.
The legal challenge pertains to an appeal brought forward by the Combined Property Control Group (CPC), after their initial challenge was rejected by the High Court in September.
CPC, which owns six properties let by Debenhams, had alleged it was being treated unfairly as a creditor for the department store chain.
Debenhams said that the time period for any appeal to be lodged has now expired, which means the entirety of the CVA challenge process has come to an end.
It also means the its CVA remains effective, and Debenhams can continue with closing 50 of its 166 stores and secure rent cuts on others in the months to come.
In January, it completed its first tranche of store closures with around 20 sites shutting down around the country.
Debenhams also said the conclusion of the legal challenge will allow its shareholders to proceed with the final phase of its debt restructuring in due course.
This is expected to take the form of a Scheme of Arrangement, resulting in the conversion of at least GBP 100 million of debt to equity.
“This will reduce the group’s indebtedness and provide a robust platform for Debenhams’ continuing recovery,” the retailer said in a statement.
Debenhams chief executive Stefaan Vansteenkiste welcomed the conclusion of the legal challenge. “We can put the distraction of this litigation behind us and proceed with our plans to turn the business around,” he said. With committed investors, a strengthened board and a restructured balance sheet we have the platform from which to rebuild a sustainable business.”
Mike Ashley’s Frasers Group – previously known as Sports Direct International – had originally backed CPC’s legal battle in September.
However, High Court judge Justice Norris rejected CPC’s challenge.
Debenhams is now owned by Celine, a consortium of lenders, with Frasers Group no longer holding a stake in the retailer.
Frasers Group had been Debenhams’ largest shareholder and attempted to gain control of the department store chain for months before it fell into administration in April last year.
This included a rescue offer to inject GBP 200 million into the business, which was rejected by Debenhams’ board at the time.
Lenders took control of Debenhams by buying it out of administration, and launched a CVA shortly after.
Fraser Group’s shares were wiped out in the process, as well as other shareholders as Debenhams was taken off the stock market.
Ashley had spent an estimated GBP 150 million on his stake in the retailer.