Landlords are reportedly weighing up whether they should take legal action against House of Fraser in light of plans to close 31 of its 59 stores through its CVA.
According to The Sunday Times, a dozen landlords are currently talks with law firm Bryan Cave Leighton Paisner about a possible block of the CVA.
The law firm reportedly told landlords that had a “very strong case” on the basis that they were being treated unequally compared to other creditors – such as banks, bondholders and shareholders.
At least 75 per cent of creditor approval is needed for House of Fraser’s CVA to proceed, with the vote set to take place on June 22.
Meanwhile, a group advising House of Fraser landlords has criticised the department store’s CVA proposals as it would see them “take all the pain” while shareholders benefit from £70 million injected into the embattled retailer.
According to the Guardian, property advisory firm JLL and consultancy firm Begbies Traynor were in talks with landlords to begin negotiations with House of Fraser for a better deal for them in the CVA.
On the other hand, real estate advisor Altus Group has blamed the government for a policy that allegedly denied House of Fraser £3 million of tax reductions on 28 out of the 31 stores earmarked for closure under the CVA.
The firm said the government’s scheme of ‘Transitional Relief’ in England, part of last year’s business rates revaluation, had an adverse effect on the earmarked stores as they were located in in England and the transitional relief arrangements limits how quickly tax bills can both rise and fall after a revaluation.
The news comes as a growing number of CVAs from UK retailers continue to attract the ire of landlords, who feel they have to bear the brunt of rent cuts to help a tenant avoid financial collapse, while other creditors who also get to vote on CVAs can do so without the same pain.
Unveiled last week, House of Fraser’s CVA would ultimately see it reduce store estate by over a half to just 28 branches, and axe up to 6000 jobs.
The CVA also includes proposals to reduce rent on 10 stores that will remain open, as well as relocate the Baker Street head office and the Granite House office in Glasgow to new locations in order to further reduce costs.
Once approved, Hamleys parent company C.banner will undergo its transaction to acquire a 51 per cent stake in House of Fraser and invest £70 million into what remains of the department store retailer.
House of Fraser chief executive Alex Williamson warned that the heritage department store chain would face collapse if its CVA proposals were to be rejected.