House of Fraser store closures to go ahead


House of Fraser has settled a legal row with a group of owners in its plan to close more than half of its stores.

The agreement means the fight department store chain, will close 31 of its 59 stores in January of next year.

The plan was put in doubt by the legal challenge from the owners, which held that the treatment to the bar of the rentals in the rest of the stores was unfair to them.

The future of the chain remains in the balance, with the shop in search of new investment in order to survive.

House of Fraser said it was now “focused on the conclusion of the talks with interested investors” and the out-of-court agreement with the owners had removed “any risk to the debates”.

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Potential suitors for the chain include Philip Day, owner of Edinburgh Woollen Mills, and whose empire retailer includes Peacocks, Jane Norman, Austin Reed and Jaeger.

Sports Direct boss Mike Ashley, who already owns an 11% stake in House of Fraser, also reached out to the chain in July over a potential investment agreement.

The lord Ashley is understood to have not communicated with the House of Fraser financial advisors’ Rothschilds since then, and The Sunday Times has suggested that it is unlikely to proceed with a bailout agreement because of concerns over the chain of pension funds.

However, industry experts say that the House of Fraser two defined benefit pension funds are fully funded.

Other names in the frame as possible saviors include investment funds, Alteri, a branch of the US hedge fund Apollo and Hilco, both of whom specialize in buying troubled companies and turning their performance.

The chain of the future has been put in doubt after Hong Kong-listed C. banner, the owner of Hamleys, pulled out of plans to take control and invest £70m in the retailer.”Matter of weeks”

Richard Lim, head of research, independent consulting in the Retail market of the Economy, says it is “very difficult to know with certainty what will happen next in House of Fraser.”

“But it is in desperate need of a rescue package. Without any type of external financing it is inevitable that you will drop in the administration.

“The funding will be in place in a matter of weeks, instead of any longer period of time, if the House of Fraser is to have a fighting chance to ensure its future.”

The retailer employs 17,500 people – 6,000 direct and 11,500 concession staff.

House of Fraser is with the company voluntary arrangements (Cva), a form of insolvency proceedings, to overhaul its business.

Cvas are increasingly being used by struggling retailers as a way to close the shops, but the owners argue that they are being abused as a quick way to cut rents.

Mark Fry of Begbies Traynor and Charlotte Coates of JLL, who advised the group of House of Fraser owners throughout the CVA process and the subsequent legal challenge, said that they were satisfied with the agreement.

“The retail trade of the CVA process in the uk has become increasingly subject to abuse and prejudices against the owners and needs correction.

“Cva were designed as a means to rescue a business, not just a tool to shed unwanted leases for the benefit of the shareholders”, added in a statement.

House of Fraser is one of a number of retailers struggle in the midst of falling consumer confidence, increased overhead costs, the weaker the pound sterling and the growth of online shopping.

The electronics chain Maplin and the toy chain Toys R Us both collapsed into administration earlier this year.

Other High-Street chains such as Mothercare and Carpetright have been forced to close the shops in order to survive.