House of Fraser CVA legal action delays £70m cash injection

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House of Fraser c.banner

House of Fraser’s promised £70 million cash injection from Chinese investor C.banner is facing delays due to the legal action filed against it by unhappy landlords.

Last week, a consortium of landlords officially filed a petition in the Scottish courts to challenge House of Fraser’s controversial CVA that was approved by creditors last month.

C.banner’s much-needed £70 million investment was conditional on the approval and implementation of House of Fraser’s CVA, which includes plans to close down 31 of its 59 UK and Ireland stores, reduce rent on 10 that will remain open, and slash 6000 jobs.

The Chinese firm’s investment also means it would purchase a 51 per cent stake in the department store chain from current majority owner Nanjing Cenbest, which is part of the Sanpower conglomerate.

However, the C.banner has now indicated that it would now delay the details of its promised investment until October 31 due to the landlords’ legal challenge.

The details of its investment were initially due to be sent to C.banner’s shareholders yesterday, which would’ve provided House of Fraser the cash injection over the summer.

The landlords’ legal action, understood to be the first posed against a CVA in Scotland, was filed on the grounds of alleged “unfair prejudice against certain creditors, as well as material irregularities in the implementation of the CVA”.

The law firm representing the landlords, Begbies Traynor, said they had a “very strong case” on the basis that they were being treated unequally compared to other creditors.

It was revealed earlier this month that major landlords, including British Land and Derwent, had voted against the retailer’s CVA and prior to the creditors’ vote a separate group of landlords reportedly held talks with law firm Bryan Cave Leighton Paisner about possibly blocking it.

House of Fraser’s wide-reaching restructure plan has been one of the most contested amid the recent surge in CVAs in the retail sector.

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4 COMMENTS

  1. Remarkable how a relatively paltry £70M could acquire a 51% stake in a national institution. Clearly not all Teams of Advisors (bankers, lawyers, accountants and financiers) are not equal.

    Consultants charge professional fees. And they should. Just make sure your advisors are ‘up to scratch.’ If all you do is the norm you will get the usual and that frankly is in the current retail rhythm rather abysmal.

    Get exceptional. I know I can help.

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  2. It is important that all this boardroom bickering doesn’t affect business at the shop door leading to full blown administration. I am disgusted at the amount of closures but this could lead to full on liquidation. Right now, plans for crucial Christmas trading and avertising should be well on the way, I hope this isn’t being forgotten. To be honest (the way this year has gone so far) it would be not surprising if HOF went bust, and due to significant under investment over the last few years, I think fewer people would care.

    The brand has become run of the mill with a bland image (logo-less black and white signage like nearly every other retailer) There is lots of potential but I think it is not going to be utilised due to the closures and boardroom bickering and indecision.

  3. Not a very clever comment as you don’t know how much debt a buyer would be assuming. In this case, its a lot (over £400m), and the cashflows no longer are able to service it. You are basically buying into never-ending capital injections for no return. Also, please note the HOF balance sheet is – to put it mildly – not giving a ‘true and fair view’. It has £500m of intangible assets which basically do not exist. As net assets were only £100m in 12/16, then that means real net assets are MINUS £400m. Its just a retailer, not a national institution, no rational investor would be interested as you can make more money just leaving it in the bank.

  4. ignoring the self publicising pap from the first contributor, both make good points. My company supplies several large retailers and it is absolutely critical that they get their orders out in time for the crucial fourth quarter delivery. So far we have not received any orders. If staff are more concerned about their jobs than running the business then the business will suffer badly and probably not survive.

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