Retail

House of Fraser survival in doubt as rescue plan falls apart


House of Fraser is fighting for its survival after the Hong Kong-listed company that also owns toy shop Hamleys abandoned plans to rescue one of the UK’s oldest and more storied retail chains.

C.banner International, a Chinese fashion group, said on Wednesday it was “impracticable and inadvisable” to proceed with acquiring a controlling stake in the department store, which would have given the company a £70m lifeline, because of a collapse of its own share price over the past month.

House of Fraser, which was founded as a Glasgow draper in 1849, said in a statement it was “in discussions with alternative investors and is exploring options to obtain the required investment on the same timetable”, but did not provide additional details on who might step in to provide a cash infusion.

The crisis at House of Fraser, which has about 5,000 employees and 12,500 concession staff, is the latest blow to a UK high street which has seen hundreds of shops boarded up and thousands of employees made redundant as retailers struggle with shaky consumer confidence, the growth of online shopping and higher bills.

Electronics chain Maplin, budget retailer Poundworld and Toys R Us all have collapsed into administration this year, while a wide range of high street mainstays — including children’s retailer Mothercare, the fast-fashion chain New Look and Carpetright — have been forced to close stores after striking company voluntary agreements (CVA), giving them protection from creditors while they reorganise.

The retail downturn has been particularly grim for big department store chains. In June alone, Debenhams issued its third profit warning of the year, citing “exceptionally difficult times in UK retail”; John Lewis issued its own profit warning; and Marks and Spencer said it was withholding director bonuses because of poor financial results.

Read More   Oil prices fall after jump the day before; glut, economy worries weigh

House of Fraser has been badly hit by a drop in shopping visits to high streets as more people buy online and is weighed down by its property commitments. Its creditors in June approved a recovery plan involving the closure of 31 of its 59 stores under a CVA that would see a sharp fall in its rent costs.

The CVA was a condition of the proposed sale of a 51 per cent stake in the group to C.banner by Nanjing Xinjiekou Department Store, House of Fraser’s Chinese owner. C.banner was to have acquired 34 per cent of House of Fraser for £71.6m and subscribe to £70m of new House of Fraser Group shares, giving it a total stake of 51 per cent.

At the time, chief executive Alex Williamson described the CVA, which put 5,000 jobs at risk, as “the only [decision] to secure our future”.

But the rating agency Moody’s this week determined House of Fraser was in technical default on its loans. It has also said that if the company was unable to complete a successful refinancing, “recovery rates for the outstanding debt would be less than 90 per cent on average across the different debt instruments”.

The CVA also faced a legal challenge last month by a group of landlords which argued that their interests had been “disproportionately affected during this CVA process”.

House of Fraser’s problems were compounded by a change in business rates last year after the government revalued property for the first time in seven years. The company said its rates bill had increased by 13.6 per cent since the revaluation, from £30m in 2016/17 to £32.8m last year and £34.3m this year.

Read More   Mumbai: Urgent pre-rain building work like water-proofing can resume



READ SOURCE

Leave a Reply

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