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Sports Direct director Mike Ashley has threatened legal action to remove Debenhams' board of directors after dismantling his stake in the department store group and transferring the company to lenders.
The listed Debenhams holding company entered the pre-pack administration on Tuesday, depriving shareholders' investments, including Sports Direct's stake of nearly 30%.
The retailer's 165 British retail outlets continue to trade through a new company owned by its banks and bondholders in return for the debt reduction of £ 600 million.
In a letter to FTI Consulting, whose officers were appointed joint directors of Debenhams, Sports Direct's lawyers requested that the insolvency process be reversed or be subject to "additional measures".
The letter, as seen by the guardian, indicated:[Sports Direct] will do everything in its power to repair the damage done to the company and other stakeholders (including small and large shareholders) by the events of today, including, but not limited to 39, to limit, the challenge of the appointment [of FTI as administrators] and all the consequences of it. "
The lawyer's letter makes it clear that Sports Direct reserves the right to appeal to the courts of "the withdrawal of FTI as a director of [Debenhams] on the grounds that you are, among others, in conflict and unable (at the very least) to perform your investigative tasks independently. "
FTI had been heavily involved in Debenhams since at least February 8, after being hired by the group's lenders. FTI was in conflict because it had sold the retailer's operating companies to those same lenders through an agreement reached prior to its administration.
Part of the administrator's duty is to investigate the events that led to his appointment. The letter, sent by Sports Direct law firm RPC, indicated that FTI was not able to do so independently.
He added that Debenhams only entered the administration because Sports Direct's rescue plans, which included the offer to subscribe to a £ 200 million fundraiser, did not been engaged.
The lenders rejected Ashley's various proposals because they all involved Debenhams' executive director.
The CEO of Sports Direct was eager to badociate Debenhams with House of Fraser, the department store group that he had purchased from the administration for £ 90 million last year.
Ashley also wanted to protect his investment in Debenhams, which had a market value of more than £ 300m less than a year ago, but was valued at less than £ 23m Tuesday morning before the stock was delisted. The shares were rendered virtually worthless as a result of the administration later in the day.
The FTI had not responded to a request for comment at the time of publication.
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