A group of landlords have filed a legal challenge to House of Fraser’s company voluntary arrangement (CVA) after creditors approved the plan to close more than half of its stores.
The group, which is advised by the property agents JLL and restructuring group Begbies Traynor, said it “believes that certain landlords have been unfairly prejudiced during this process and that there have been alleged material irregularities in the implementation of House of Fraser’s CVA”.
A spokesperson for the group said it included Lunar Altrincham, which owns House of Fraser’s Altrincham store, Autumn Properties, which owns a store in Birkenhead, and Eden Commercial, which owns a store in High Wycombe.
It has filed the challenge in the Scottish courts because the two House of Fraser companies involved are Scottish-registered.
The move comes ahead of a July 24 deadline for filing legal challenges to the CVA, which was approved by creditors last month. It was one of a series of CVAs that have resulted in hundreds of store closures this year, with Mothercare and Carpetright also entering into the insolvency arrangements.
The group said: “It is our view, and that of our legal counsel, that landlords have been disproportionately affected during this CVA process; not only compared to other creditors, but also to how they could have been treated if alternative routes to rescuing the business were fully explored.”
Alex Williamson, House of Fraser’s chief executive, said at the time that the CVA — which puts 6,000 jobs at risk — was “the only [decision] to secure our future”.
The CVA, which provides for the closure of 31 stores starting next year, is a crucial part of House of Fraser’s restructuring plan. The planned sale of a 51 per cent stake in the parent group by Nanjing Xinjiekou Department Store to C.banner, a Hong Kong listed company that also owns Hamleys toy shop, is conditional on the CVA proceeding.
In addition to buying shares from Nanjing Xinjiekou, C.banner intends to subscribe for new shares, providing House of Fraser with a much-needed cash injection. The UK operating subsidiary has not yet filed its accounts for the year to January, but it had a poor Christmas and trading in the initial weeks of its current financial year was also difficult.
C.banner’s circular to its own shareholders, whose approval the transaction requires, has already been delayed. It is now set to be dispatched no later than July 26. The company’s auditor’s also recently resigned. However, C.banner has secured letters of intent from strategic investors to provide up to HK$1.32bn of equity finance.
House of Fraser said in a statement: “Whilst we are disappointed, we look forward to robustly defending our position and we are confident that this will not affect our commercial plans.”