Debenhams is set for another clash with Mike Ashley’s Sports Direct group at a meeting to approve a plan for at least 22 store closures on Thursday.
The billionaire, whose attempt to take control of the ailing department store group was thwarted when it was taken over by lenders in April, is expected to send along a representative to ask tough questions and vote against the plan at a creditors meeting.
Landlords and other creditors, such as clothing suppliers, must vote to approve the closures which form part of two company voluntary arrangement deals which Debenhams’ new owners say are necessary to prevent the business collapsing.
Sports Direct will take part in the vote as Ashley’s retail group was owed more than £0.5m by Debenhams at the time the CVA was tabled, according to documents seen by the Guardian.
Sir Philip Green’s Arcadia group will also have a major part to play in the vote as its chains including Burton, Miss Selfridge, Topshop and Wallis are collectively owed more than £5m according to the CVA documents. Green is likely to want the Debenhams plan to succeed given that Arcadia is battling to secure its own CVA within weeks.
But trade creditors and landlords expect the insolvency process – under which 22 stores will close on 24 January and which also includes cuts in rent and business rates of up to 50% on dozens of sites – will be given the thumbs up.
One said: “I will be gobsmacked if it doesn’t go through. The pension fund is on board and trade creditors will say yes.”
Landlords are also expected to approve the deal despite those owning 22 stores set for closure in January, including Ashford, Kirkcaldy, Newbridge and Wimbledon in south London, being hit by 50% rent cuts until then.
If the CVA goes ahead, rents and this year’s rate payments will also be halved on a further 36 stores, including Chester, Croydon, Falkirk, Salisbury and at the Westfield shopping centre in west London.
Local councils including Bradford, South Tyneside and Falkirk will all take a rates cut. Wandsworth borough council in south London will be the hardest hit as stores in Clapham and Wandsworth are both subject to rates cuts although only the Wandsworth site is marked for definite closure in January.
Landlords in dozens more stores will take rent cuts of 25% and 35%.
Landlords in those stores subject to rent cuts will have three months from the retailer’s next rental payment in June to choose to turf Debenhams out. The retailer would then have between two and three months to exit, so that some stores could close as early as August.
Several industry sources said Sports Direct had been trying to pick off Debenhams properties by offering landlords slightly better deals than those available under the CVA.
At all but 48 stores, where no rent cuts are being sought, Debenhams will be able to exit under mutual agreement with landlords on the second, third or fifth anniversary of its next rental payment.