House of Fraser owed creditors close to £1bn when it collapsed

House of Fraser had debts of close to £1bn when it collapsed, with more than half owed to suppliers ranging from Polo Ralph Lauren and Mulberry to Liam Gallagher’s Pretty Green fashion label.

The department store hasclosed down its website, cancelled orders and reimbursed customers after a dispute with its warehouse operator, XPO, to whom it owed more than £30m when it went into administration last Friday.

More than 1,000 suppliers will not receive any money from the company’s administrator, EY, which was called in ahead of the sale of the retailer to Mike Ashley’s Sports Direct for £90m.

Sports Direct is in discussions with suppliers about potential deals, but has so far only promised to cover money owed after Ashley bought the business.

The purchase price went towards paying off House of Fraser’s banks and bondholders, which together were owed about £400m.

XPO is the biggest trade creditor followed by Ralph Lauren, which was owed £9.4m, the footwear retailer Kurt Geiger, which was owed £4.9m, and the women’s fashion brand Phase Eight, which was owed £3.4m. The details of the debts were revealed in a report from EY.

The report showed a range of fashion and beauty brands were owed more than £2m, including Tommy Hilfiger (owed £3.3m), Barbour (£3m), Mint Velvet (£2.5m), Mulberry (£2.4m) and L’Oréal (£2m).

Pretty Green, the fashion label launched by Gallagher, the former Oasis frontman, was owed just over £500,000, while Philip Day, the owner of Edinburgh Woollen Mill, and Jacques Vert – who fought Ashley for ownership of House of Fraser as it collapsed – was owed nearly £3m.

Read More   Scripbox introduces goal based approach to investing

Sports Direct has no legal obligation to pay suppliers money owed before its buyout as the debts were part of the administration. However, new owners often agree to settle at least some of the debts in the interest of good relations.

Some fashion suppliers have taken action while negotiations over payments continue. Jigsaw has removed stock from 20 stores, and brands including Karen Millen and Mint Velvet are also understood to have withdrawn some stock. These brands run concessions in House of Fraser stores and therefore own unsold items. Ownership of that stock was not passed to administrators or included in Sports Direct’s purchase.

Pensioners are also likely to lose out under the deal. The House of Fraser pension fund has not been taken on by Ashley and will be assessed by the industry-funded lifeboat, the Pension Protection Fund.

It is likely to be sold to a specialist insurance fund, but the higher costs involved in that process mean the House of Fraser fund could be more than £160m in deficit, so members yet to draw a pension will not get their full benefits.

More than 15 parties expressed an interest in buying House of Fraser, according to the administrator’s report, but only six made formal offers.

The report said Day put in a £100m offer for the business, but “this party communicated that they could not justify the transaction commercially and they were withdrawing their interest”.

It is understood that Day disputes this description of events, arguing his bid was only withdrawn because he did not agree with how money would be distributed to debtors.

Read More   Walmart raising tobacco purchase age to 21

Ashley has said he wants to create the “Harrods of the high street”, with the aim of keeping 47 of House of Fraser’s 59 stores open – nearly 20 more than had been planned by its previous owners. He has already begun negotiations with landlords, but at least 15 are understood to have approached Day with hopes of securing a better deal.

Sports Direct is running House of Fraser’s stores under licence from EY, so he is free to hand back the keys without penalty on any store he does not want.

Ashley is understood to be close to signing an agreement to secure the flagship Oxford Street site, but no deal had been confirmed on Friday.


Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.