Landlords could reject House of Fraser CVA

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House of Fraser has been slammed by the British Property Federation (BPF) over the handling of its impending company voluntary arrangement (CVA).

According to the BPF, the department store, which confirmed plans to enter insolvency proceedings through a CVA yesterday, failed to discuss the move with landlords.

To be launched in June, the CVA would see yet-to-be disclosed number of its 59 stores close down, with many more seeking reduced rents in the proceedings.

Landlords are therefore in line to be one of the worst affected parties.

In light of this, the BPF has said landlords would only support the CVA, which is yet to secure approval from shareholders, “grudgingly” if at all.

“Over the past few months landlords’ have supported several CVA proposals, where discussions have taken place before the restructuring business has gone public,” BPF real estate policy director said.

“This allows for a constructive dialogue, but House of Fraser has not followed this best practice.

“The understanding landlords have shown on a couple of previous CVAs we think will therefore be absent, because of the way this has been handled.

“Announcing the CVA via a statement on new investment, whilst helpful to the overall continuation of the business, is highly insensitive when you are asking property investors to absorb large losses.

“We think any discussions on this CVA will therefore be awkward and any support for the CVA given grudgingly.”

The news comes after industry body Revo criticised CVAs for having a disproportionate impact on landlords and property owners.

Its president Mark Williams said: “The result is property investors, often the very pension funds of many of the shop employees, and the shop staff lose out, whilst the owners of the business take no direct pain.”

A slew of retailers have been using the process over the last six months, including New Look, Carpetright, Maplin and Toys R Us, all of which have significant store estates.

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    • So true! The landlords really don’t have a negotiating position on this and it’s likely that HoF knows this and will leverage it to get the best deal, so why would they entertain an early dialogue with landlords?

  1. The CVA was no surprise and I’m reasonably sure all the landlords of stores had been contacted beforehand by the HoF Board to explain the problems the business faced and asked for assistance.


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