Debenhams enters Company Voluntary Arrangements (CVA) after restructuring plans go wrong. Retail giant Debenhams went into pre-packed administration on 9th April 2019. For further details of the original development of this story, you can access our previous blog available here: Are Debenhams Stores Closing?
Since our last blog on this topic, Debenhams has rejected finance offers put forward by Sports Direct. Sports Direct were Debenhams largest shareholder, owning approximately 29% of its issued share capital at that time. Control over Debenhams has since passed to its lenders; i.e. Barclays and US hedge funds. As a result, Sports Direct lost its shares in Debenhams together with its investment of approximately £150 million.
What happened since 9th April 2019?
Debenhams announced on the 26th April 2019 that it had planned for rent reductions; as well as closing 22 stores after Christmas 2019. This is part of a Company Voluntary Arrangement (CVA) (a specialist insolvency procedure) that Debenhams entered in to with a view to reach an agreement with its creditors to pay off all or part of its debts and provide a turnaround for Debenhams. It confirmed that “Debenhams’ CVA proposals were approved by the vast majority of landlords and more than 90% of all creditors”.
The creditors (including Sports Direct) were given a 28-day period during which they could appeal the CVA. Sports Direct challenged the CVA in court, with a view to overturn such arrangement, following the decision of Debenhams’ creditors to turnaround the store chain by closing approximately 50 stores and reducing rents to approximately 100 stores.
What do the lenders say about Company Voluntary Arrangement challenges?
It is noted that the lenders confirmed the CVA challenges are “spurious, without merit and will vigorously defend them”. Moreover, such challenges are just ‘unnecessary distraction as the lenders implement their restructuring plans”.
What happens next?
It is not certain at this moment in time whether Sports Direct’s challenge will be successful or not. However, if the claim is successful, Debenhams may have to change their current restructuring plans.
As a result, the future of Debenhams continues to appear to be both bleak and precarious – with further developments expected in the not-too-distant-future.
The Corporate Commercial Department here at Fisher Jones Greenwood LLP can assist you with a company voluntary arrangement, internal restructures, sale of a business, acquisitions, and/or any other related services; as well as assist you with the preparation of any documentation required and guide you through the transaction.
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Source: BBC News
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