House of Fraser’s deal with landlords removes rescue hurdle

House of Fraser has settled a claim by its landlords that had threatened to scupper a sale of the struggling UK department store group. 

The company had faced a legal challenge after revealing plans to use a company voluntary arrangement process to shut half of its stores.

CVAs enable companies to either settle debts or come to arrangements with creditors to cut costs but have been criticised by landlords who argue they are treated as “second rate creditors” in the process as rents are slashed. Mothercare, Carpetright and New Look are among retailers to have resorted to CVAs this year.

The challenge from House of Fraser’s landlords was lodged before its future was thrown into doubt when Hong Kong-listed shoe retailer C.banner abandoned plans to inject £70m into the business. The retailer entered frantic talks last week with potential buyers that could rescue the business.

The settlement could prove crucial to attracting a bidder as it removes a significant hurdle to a deal, according to people briefed on the talks. 

The company said: “House of Fraser is focused on concluding discussions with interested investors as per the original timelines set out by the business and recognising the risks in and around this litigation has entered into this settlement now to remove any risk to those discussions presented by this legal process.”

Mark Fry of Begbies Traynor, and Charlotte Coates of JLL, the legal advisers to the landlords, said in a joint statement: “Although we will not have our day in court, we are pleased with the outcome and hope that our landmark legal challenge sends a clear message to any other companies considering a CVA, on the importance of transparency and fair treatment for all creditors throughout a CVA process.”

Neither House of Fraser nor the landlords would comment on details of the settlement.

Mike Ashley, the billionaire owner of Sports Direct who owns an 11 per cent stake in House of Fraser, is said to have cooled his interest in acquiring the department store over the weekend, according to media reports. However, two people with direct knowledge of the sale process said he remained in the running.

Sports Direct declined to comment. 

Suggestions that Mr Ashley had not been provided with access to information or management during the sale process had left House of Fraser’s advisers “perplexed”, prompting an unusual public intervention by the company’s bankers.

Majid Ishaq of Rothschild, which is advising the retailer, said: “Clearly we are talking to a number of parties. Contrary to various suggestions, every interested party is being given access to information and management as required”.

* This article has been amended since original publication to clarify the timing and source of the previously proposed £70m cash injection.


Leave a Reply

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