House of Fraser’s creditors are reportedly set to assess and finalise a decision on rescue bids from turnaround firm Alteri Investors and retail tycoons Philip Day and Mike Ashley today.
According to Sky News, PwC spent yesterday negotiating on behalf of the department store’s lenders and bondholders on at least three potential bids that could determine the heritage retailer’s fate.
Sources told Sky News that Day’s bid would allow House of Fraser to avoid administration and expand the restructuring plan as part of its CVA – which was already approved by creditors – while honouring existing pension obligations.
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However, the bid from Ashley – who already owns an 11 per cent stake in House of Fraser – reportedly involved putting it through a pre-pack administration. This is an insolvency process that can leave behind liabilities, such as pension schemes.
Sky News said details of Alteri’s bid were unclear and hinted that another rescue offer could still potentially emerge.
PwC is now thought to be preparing itself to outline the creditors’ preferred option to Rothschild, adviser to House of Fraser’s board, as early as today.
The news is the latest chapter in House of Fraser’s ongoing saga to stay afloat.
On Tuesday, City AM revealed that the retailer rejected an offer from Paul McKie to take on the 31 stores set for closure in January 2019 as part of its CVA that was approved in June.
McKie was understood to have offered between £30,000 and £50,000 per store for the leases and rent obligations from September.
Over the weekend, House of Fraser settled a legal dispute with landlords who sought to challenge its CVA, which, alongside the 31 of its 59 stores earmarked for closure, also features rents reductions on 10 stores that will remain open, relocation of head offices and 6000 job cuts.
It’s thought that the result of the legal challenge would pave way for the department store to secure the new funding it urgently needs.
Chinese investment firm C.banner, also the owner of toy retailer Hamleys, had promised an investment of £70 million for House of Fraser, which was conditional on the implementation of its CVA.
House of Fraser’s current majority owner Nanjing Cenbest had also signed a memorandum of understanding that C.banner would purchase 51 per cent stake in the department store after the CVA process was complete.
However, C.banner withdrew its planned cash injection in late July, just days after it said it would delay it until October due to the landlords’ legal action – which was initially filed on July 20 – and therefore intensifying House of Fraser’s urgent scramble to secure investment.
C.banner’s withdrawal also came a day after influential credit ratings agency Moody’s judged House of Fraser to be in technical default on its loans, downgrading it from the “very high risk” rating it received in December.
Without £40 million of new funding by August 20 to pay concession operators, it is predicted that House of Fraser would be unable to survive.
It also needs further funds to pay for its quarterly rent bill of nearly £25 million in late September and to make sure there is enough stock for the upcoming Christmas trading period.
House of Fraser’s creditors could still potentially decide not to pursue any of the rescue bids on the table, which would then lead to to an instant collapse into administration and no guarantee that the retailer could be salvaged.
However, Sky News said House of Fraser’s board remained cautiously optimistic that a rescue deal would be secured before the end of the week.