Wednesday 17 October 2018

House of Fraser in bid to appease furious landlords over store closures

The department store will need creditor support to push through its restructuring plan.

Landlords have expressed concerns about House of Fraser's restructuring plan Dominic Lipinski/(PA)
Landlords have expressed concerns about House of Fraser's restructuring plan Dominic Lipinski/(PA)

By Helen Cahill, Press Association City Reporter

House of Fraser bosses are scrambling to secure the backing of furious landlords for the retailer’s radical store closure plan following a volley of criticism.

The department store chain is seeking approval for a restructuring plan known as a Company Voluntary Agreement (CVA), which will allow it to shut stores and cut rents.

It has now emerged House of Fraser chiefs met with landlord representatives the day after a public backlash over the CVA proposals earlier this month, sources told the Press Association.

Landlords were infuriated by the retailer’s proposal because it simultaneously announced an injection of capital from a new Chinese investor, the Hamleys owner C.banner.

They were outraged House of Fraser would argue it was financially distressed as a pretext for ditching its rent obligations, despite having won new backing from China.

  • New Look
  • Byron
  • Jamie's Italian
  • Carpetright

At the crunch meeting, which was brokered by House of Fraser’s restructuring adviser KPMG, the retailer’s representatives expressed surprise at the strength of the response from landlords, and said they were keen to address any outstanding issues.

House of Fraser also explained it had not engaged landlords in discussions earlier, which is considered best practice when pursuing a CVA, because the rules of the Hong Kong Stock Exchange prevented it from making a formal announcement.

The discussions between the two sides have been described as constructive, but it is not known whether House of Fraser will arrange a further meeting to formally put its proposal to landlords, or whether the company will consider their concerns.

Sources said a more formal meeting about the CVA proposal could take place next month, but that discussions were likely to be tense, given the way the restructuring process had been handled so far.

The CVA will be launched in June, but will only go ahead if 70% of landlords back the plan.

House of Fraser has 59 stores in the UK, and it is thought dozens could close.

A string of retailers and restaurant groups have undertaken CVAs, including New Look, Byron, Jamie’s Italian and Carpetright.

While landlords have voted through all of the CVAs proposed this year, the process is controversial because it leaves landlords out of pocket.

Institutional investors, which own commercial properties through property funds, are also affected by CVAs, meaning pension funds are impacted by rent reductions and store closures.

Press Association

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