House of Fraser creditors back survival plan but concerns continue
It’s official, House of Fraser will live to fight another day. Despite doubts around its CVA plan, the company’s creditors voted in favour of it on Friday which means the firm will now close 31 of its stores, reducing its size by more than half in the process.
The 169 year-old business will also get rent reductions on another 10 stores as part of its plan to get back to full health.
Its Oxford Street flagship will go, as will a number of other heritage sites, mainly in declining high street locations. It will mean the loss of 6,000 jobs, 2,000 of them directly employed and 4,000 of them concession staff.
The alternative to the plan would almost certainly have been an administration filing with the purchase of a 51% stake by China’s C.Banner, a £70 million cash injection, and a major extension of its loans, all dependent on the plan getting the thumbs-up. But the fact that HoF is getting new investment, while landlords are taking a major income hit on large properties that will be hard to re-let quickly, has angered many in the property sector.
The company received more than the required 75% support it needed for the plan but some creditors remained unhappy. Landlords had been unimpressed to see their voting power reduced due to the way the vote was structured and there were suggestions that a legal challenge could be mounted.
In a joint statement, Mark Fry of Begbies Traynor and Charlotte Coates of JLL, who have been advising a group of landlords, said: “It is disappointing that the CVA has been agreed without proper engagement with the landlords, many of whom manage the pensions and investments of the man in the street, despite them having so much at stake through the process.”
Mark Williams, who heads property industry body Revo said the CVA system is in urgent need of reform. “[CVA] legislation is completely broken and needs urgent review,” he said. “Action must be taken now. Landlords alone – many of which are pension funds and local authorities – are being made to pay for the mistakes of the business owners, and the Government’s failure to reform the business rates system.”
HoF CEO Alex Williamson admitted the actions linked to the CVA were “clearly a difficult decision to take but [they are], ultimately, the only one to secure our future. Our focus is on supporting all of our affected colleagues and we are exploring every opportunity available to them working alongside the Retail Trust and the wider retail community.”
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