House of Fraser CVA thrown into doubt due to landlord backlash

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House of Fraser CVA

House of Fraser is struggling to get approval from landlords for its company voluntary arrangement (CVA), throwing doubt over whether it’ll go ahead.

According to the Press Association, earlier this month representatives from the embattled department store met with landlords to discuss the proposed CVA, which once launched in June is due to see swathes of stores close and significantly reduce rents on others.

This meeting took place the day after landlords slammed the retailer for proposing rent reductions due to its financial distress the same day it revealed a significant cash injection from C.banner, the Chinese owner of Hamleys.

The meeting is understood to have been tense, with the retailer’s representatives reportedly expressing surprise over the heated response from landlords.

House of Fraser’s handling of the process has previously sparked outrage from landlords over its failure to discuss the move before announcing CVA plans, usually considered best practice.

It defended this move by stating that the rules of the Hong Kong stock exchange prevented it from doing so.

Sports Direct, which owns an 11 per cent stake in the retailer, has also expressed anger at its handling of the situation.

The sportswear retailer is now set to sue House of Fraser over allegations it is being unfairly denied access to information linked to House of Fraser’s upcoming CVA, claiming it has been “frozen out” and prompting it to file a petition at the High Court.

This has thrown the retailer’s CVA into doubt as it needs 70 per cent of approval from landlords to go ahead.

Another formal meeting is understood to be on the cards next month.

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1 COMMENT

  1. Unlike say New Look, HoF’s landlords are in a different position as the premises occupied by HoF stores are much larger and are difficult to fill with any alternative tenant. Landlords only option would be to spend a lot on renovating the properties and breaking them into smaller units (often not possible as who wants to be on 4th floor of an ex-department store?). They bought the sites using long-term money backed by long-term leases with HoF and now they will end up breaching their covenants. The question therefore is whether or not any rent decrease could be enough to allow HoF to be turned around. If not, then given the losses it would seem they are heading for administration.

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