Mike Ashley backs challenge to Debenhams rescue deal

A deal that saved Debenhams from administration will be challenged in the High Court this week, putting the retailer’s future back into doubt.

A commercial landlord – backed by Mike Ashley’s Sports Direct group – is fighting the plan which saw Debenhams agree to shut 50 stores and secure rent cuts on others in May.

If successful, it could lead Debenhams to fall back into administration.

The retailer said it was “extremely confident” the action would fail.

Earlier this year, Debenhams fell into the hands of its lenders as part of an administration process, wiping out Mr Ashley’s near-30% stake in the company.

Shortly afterwards the creditors approved the rescue deal – or company voluntary agreement (CVA) – which will see landlords take rental cuts of up to 50%.

Combined Property Control (CPC), which owns the freehold to six Debenhams stores, including Southampton, Harrogate and Folkestone, argues that the CVA was not run properly and should be overturned.

In a twist, the legal case – which begins on Monday – is being funded by Sports Direct, which launched – but then withdrew – a similar challenge in July.

That came after Mr Ashley twice said he was considering making an offer for Debenhams in April.

Of the latest legal case, a spokesperson for Debenhams said: “We remain extremely confident this challenge is without merit and expect it to fail.

“In the meantime, we are progressing with our restructuring, which was approved by the vast majority of creditors, including over 80% of landlords.”

The retailer said it would appeal if it lost the case.

Before it was rescued, Britain’s biggest department store chain had been hit by a succession of profit warnings amid a retail slowdown on the High Street.

The firm, which currently has 166 stores and employs about 25,000 people, hopes its CVA and recent changes to management will get it back on track.

Stefaan Vansteenkiste from restructuring specialists Alvarez & Marsal became chief executive last month, replacing Sergio Bucher who stepped down in April.

But if CPC wins its case, Debenhams’ restructuring plan could unravel.

According to reports over the weekend, Debenhams has asked advisers at professional services firm Deloitte to come up with contingency plans should it lose the case and its CVA be derailed.

The High Court case ends on Friday, although the ruling is likely to be delivered at a later date after the judge has deliberated.

Philip Hammond plans to resign as Chancellor if Johnson becomes PM

Philip Hammond has announced that he intends to resign as chancellor if Boris Johnson becomes the UK’s next PM.

He said a no-deal Brexit, something Mr Johnson has left open as an option, was “not something I could ever sign up to”.

Asked if he thought he would be sacked next week, Mr Hammond said he would resign on Wednesday to Theresa May.

He said he intends to quit after Prime Minister’s Questions but before Mrs May steps down.

Speaking on the BBC’s Andrew Marr Show, Mr Hammond said it was important the next PM and his chancellor were “closely aligned” on Brexit policy.

Mr Johnson has said the UK must leave the EU by the new Brexit deadline of 31 October “do or die, come what may”.

His leadership rival Jeremy Hunt has said a no-deal exit cannot be ruled out, but he is prepared to further delay Brexit if required to get a new withdrawal deal.

Mr Hammond said the situation “might be more complicated” if Mr Hunt wins the Tory leadership contest, but “all the polling” suggested Mr Johnson would succeed.

“That is what is likely to happen, and I’m making my plans accordingly”, he said, adding he would wait until the result is announced on Tuesday to “see for sure”.

Mr Hammond said he understood committing to leave by this date, even with no deal, would be a condition for serving in Mr Johnson’s cabinet.

He said: “That is not something I could ever sign up to. It’s very important that a prime minister is able to have a chancellor that is closely aligned with him in terms of policy”.

He added that Jeremy Hunt’s position regarding a no-deal Brexit was “more nuanced”, and he had not demanded a “loyalty pledge” on the exit date from prospective ministers.

Mr Hammond said he would support either man in their pursuit of a new Brexit deal, but it would not be possible to agree this before the end of October.

“A genuine pursuit of a deal will require a little longer”, he added.

Mr Hammond has been a prominent critic of the idea of a no-deal Brexit, recently indicating he may vote to bring down the next PM to stop such a scenario.

He had said he could “not exclude anything” when asked whether he would back a motion of no-confidence in the government.

Asked whether he would go against the next PM in a vote of no confidence, he said: “I don’t think it will get to that”.

“I am confident that Parliament does have a way of preventing a no-deal exit on October 31 without parliamentary consent”.

“I intend to work with others to ensure Parliament uses its power to make sure that the new government can’t do that”, he added.

Earlier, Justice Secretary David Gauke reiterated his intention to resign from government should the next prime minister pursue a no-deal Brexit.

Mr Gauke told the Sunday Times: “If the test of loyalty to stay in the cabinet is a commitment to support no-deal on October 31 – which, to be fair to him, Boris has consistently said – then that’s not something I’m prepared to sign up to.”