House of Fraser has become the latest high-profile British retailer to face speculation over its financial health after crisis talks to secure £40 million of funding reportedly collapsed due to its mounting debt.
According to The Sunday Times, the department store chain’s executives met with Alteri, an investor firm that specialises in turnarounds on struggling retailers, with the aim of securing the funding.
However, it is understood that the negotiations were scuppered because House of Fraser’s main assets have already been pledged as collateral against existing debts.
The high street giant – which has 59 stores and directly employs 6000 staff and hosts another 11,500 concession workers – is thought to have £400 million of loans, made up of bank debt and bonds.
“As you’d expect in the current market, [finance] providers are keen to talk to retailers,” a House of Fraser spokesperson said.
They added that the terms of the retailer’s existing banking arrangements meant it was unable to borrow from secured lenders.
The news comes after Sky News reported on Friday that House of Fraser’s banks had hired EY to double-check the retailer’s financials and the chances of them recovering their loans amid concerns about its future.
The spokesperson said that House of Fraser continued to have “the full financial support” of its shareholders.
The past few months have been turbulent times for the heritage department store, which recorded a slump in Christmas sales, had its credit rating downgraded, sought to reduce rents through talks with landlords, and drafted in Rothschild to help refinance its debt package.
In addition, earlier this month the Chinese firm that has a majority ownership in House of Fraser confirmed plans to offload most of its stake to another Chinese firm.
Nanjing Xinjiekou Department Store Co – or Nanjing Cenbest – has an 89 per cent stake in House of Fraser and planned to sell 51 per cent of it to tourism development company Wuji Wenhua.
This would mean Nanjing Cenbest, which acquired House of Fraser in 2014 and is a subsidiary of the Sanpower Group, would retain a 38 per cent stake in the retailer.
The department store is due to announce its full-year results in mid-April, as well as an update on its transformation plan to find £26 million of savings per year.
House of Fraser’s woes come amid a string of high street casualties in recent weeks with Toys R Us, Maplin, Warren Evans and Feather & Black falling into administration while Mothercare, New Look, Carpetright, and Bargain Booze owner Conviviality were all forced to seek help.
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