House of Fraser has been given some breathing space from lenders ahead of a crucial vote on CVA plans that will likely lead to 31 store closures and 6000 job cuts.
According to Press Association, the embattled department store retailer has conditionally agreed an extension to a £125 million term loan and a £100 million revolving credit facility.
Sources speaking to the news wire agency said this came about from discussions with HSBC and Industrial and Commercial Bank of China.
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The extension of the loan, now due in the fourth quarter of 2020, is expected to give House of Fraser more than a year to restructure and improve its trading performance.
However, the catch is that lenders will only approve the extension if landlords approve House of Fraser’s CVA plans, which features 31 store closures and rent cuts on a further 10.
It is also conditional on House of Fraser obtaining £70 million from Hamleys parent company C.Banner, which is poised to purchase a 51 per cent stake in the retailer and inject new capital once the CVA is approved.
The news come as landlords threaten legal action against House of Fraser, alleging that they would be forced to take a financial hit while House of Fraser enjoys new investment.
Around 12 landlords are reportedly engaging with law firm Bryan Cave Leighton Paisner about a possible block of the CVA.
The CVA can only be implemented once approved by at least 75 per cent of House of Fraser’s unsecured creditors, with the vote set to take place on June 22.
The CVA comprises two legal entities, House of Fraser Stores, which contains the retailer’s main operating entities, and House of Fraser Limited.
In light of recent news there is speculation that landlords would vote down the CVA of House of Fraser Limited, which contains the leases of 14 stores, many of which are unprofitable, meaning this entity would go into administration.
Two of these stores could be absorbed by House of Fraser Stores, which has more chances of having its CVA approved as landlords do not have enough votes to block it.
“A CVA is the only viable option for House of Fraser at this stage and we are confident, if approved, that this will secure a sustainable future for House of Fraser,” a House of Fraser spokesperson said.
Chief executive Alex Williamson previously warned that the heritage department store chain would face collapse if its CVA proposals were to be rejected.
Advisers and lenders to House of Fraser have reportedly been contingency planning for a full administration of the retailer, should its CVA fail.
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