Debenhams PLC (LON:DEB) said one of its landlords has dropped its lawsuit over the department store chain’s restructuring plan and urged Sports Direct International PLC (LON:SPD) to do the same.
M&G Real Estate, a major landlord and investment company owned by insurer Prudential, launched legal action against Debenhams last month after other landlords and creditors approved a company voluntary arrangement (CVA) – an insolvency procedure that allows a struggling business to close stores and negotiate lower rents on remaining sites.
Debenhams plans to close about 50 stores in the UK and to cut rents on many others as part of the CVA.
READ: Debenhams lenders back restructuring plan, leaving 50 stores facing the axe
The retailer was taken over by a syndicate of banks and hedge funds it owed money after it fell into administration in April, wiping out shareholders including Mike Ashley’s Sports Direct.
The move angered Ashley, who wanted to take control of Debenhams.
Last month Sports Direct started legal action over the CVA. The sportswear retailer was joined by Combined Property Control (CPC), which owns six Debenhams stores.
M&G at the same time confirmed it had mounted a separate challenge “in the interests of our investors”.
Debenhams calls on Sports Direct to end lawsuit
Debenhams said on Monday that it has resolved the dispute with M&G following “positive, constructive discussions”.
The lawsuit with Sports Direct and CPC remains outstanding.
"I am pleased that M&G has recognised the necessity for the CVAs and that as a result of the discussions we have had, it has withdrawn its challenge,” said Debenhams chairman Terry Duddy.
“I call on Sports Direct and CPC to do the same. If they do not, we will seek to have it thrown out. In the meantime, we continue to make good progress with the company's restructuring plans."
Debenhams argued that the CVA would allow it to adapt to the changing retail environment as more consumers shop online and would provide a platform for “sustainable future growth” .