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Thursday 20 September 2018

House of Fraser secures breathing space from lenders ahead of crunch vote

Landlords will vote on House of Fraser’s store closure programme this Friday.

House of Fraser is expected to close 31 stores (PA)
House of Fraser is expected to close 31 stores (PA)

By Helen Cahill, Press Association City Reporter

House of Fraser has secured significant breathing space from its lenders ahead of a crunch vote on store closures that will likely lead to the loss of 6,000 jobs.

Following discussions with HSBC and Industrial and Commercial Bank of China, the troubled department store has conditionally agreed an extension to a £125 million term loan and a £100 million revolving credit facility, sources told the Press Association.

It is thought the extension of the loan will give House of Fraser more than a year to restructure and improve its trading performance. The loans will now fall due in the fourth quarter of 2020.

However, lenders will only approve the extension if landlords approve House of Fraser’s restructuring plan, known as a Company Voluntary Agreement (CVA).

The loan extension is also conditional on House of Fraser receiving £70 million from Hamleys owner C.Banner, which is buying a 51% stake in the business and injecting new capital.

Landlords have publicly hit out at the CVA, complaining that they are being forced to stomach a financial hit at the same time as House of Fraser enjoys new investment.

The CVA will lead to the closure of 31 stores, with rent cuts on a further 10, if it is approved by 75% of House of Fraser’s unsecured creditors.

The CVA comprises two legal entities, House of Fraser Stores, which contains the retailer’s main operating entities, and House of Fraser Limited.

It is likely landlords will vote down the CVA of House of Fraser Limited, which contains the leases of 14 stores, many of which are unprofitable, meaning this entity will go into administration.

Two of these stores could be absorbed by House of Fraser Stores, which is more likely to have its CVA approved because landlords do not have enough votes to block it.

Advisers to House of Fraser and the business’s lenders have, however, been contingency planning for a full administration of the business, should both parts of its CVA fail.

This would trigger a sale process for the business. Sports Direct chief Mike Ashley, who owns 11% of House of Fraser, is widely tipped to make a swoop on the department store.

A House of Fraser spokeswoman said: “A CVA is the only viable option for House of Fraser at this stage and we are confident, if approved, that this will secure a sustainable future for House of Fraser.”

Press Association

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