House of Fraser hits back at “unhelpful” CVA rumours

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Sports Direct House of Fraser

House of Fraser has attempted to quell rumours that its plans to launch a company voluntary arrangement (CVA) is hanging in the balance.

Last month, the department store confirmed it would unveil a CVA sometime in June, ending weeks of speculation regarding its financial health.

The CVA was announced on the back of a conditional agreement from Hamleys parent company C.banner International to acquire a 51 per cent stake from current majority owner Nanjing Cenbest.

However, recent reports have suggested that House of Fraser’s CVA now hangs in the balance amid allegations that talks between the struggling retailer and its lenders had reached a deadline, threatening to scupper its rescue bid.

It follows previous reports on lenders also demanding more clarity over funding before the CVA was finalised and disgruntled landlords who would bear the brunt of the rent cuts or store closures that come from it.

In response, on Sunday House of Fraser issued a statement clarifying what it called “inaccurate and unhelpful media speculation” while insisting it was still on track to launch its CVA in early June.

“It also continues to be the case that this transaction will see the injection of significant fresh liquidity into the business,” the department store said.

“House of Fraser is in close dialogue with its lending banks who are supportive of the company’s plans and the transaction with C.banner is progressing as expected.

“As a demonstration of this fact, C.Banner confirmed on 1 June, in an announcement to the Hong Kong stock exchange, that it had successfully entered into subscription agreements for new shares in C.Banner of HK$1.3 billion (£124 million).”

House of Fraser added that “irrevocable undertakings” done by C.banner over the weekend now approved “all elements” of the proposed transaction.

“This funding is for the purchase of the 51 per cent shares of House of Fraser Group as per the original announcement,” the retailer said.

House of Fraser chairman Frank Slevin said C.banner’s approval of the transaction was “another important milestone in this complex process”.

“We continue to have very constructive talks with our banks and other stakeholders who are positive about the [CVA] plan,” he said.

Chief executive Alex Williamson added: “If we are to deliver a sustainable, long-term business supported by new liquidity then we need to make difficult decisions about our underperforming legacy stores.

“I am conscious that inaccurate speculation only feeds the ongoing uncertainty for my colleagues in the business and I reassure them we will share further news when we have it.”

CVAs are a form of insolvency that allows retailers to shut loss-making stores, reduce rents and cut costs in a bid to keep the business in operation and avoid administration.

House of Fraser’s CVA includes plans to reduce floor space by 30 per cent, reduce rents, and shut down around a third of its 59-strong store estate.

This places the future of 5000 directly-employed and 12,500 concession staff members in jeopardy.

For the CVA to go ahead, House of Fraser needs the backing of its creditors, which includes landlords and lenders.

Without it, it could be forced to call in administrators.

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