17,000 jobs in peril as Fraser ‘nears collapse’
Landlords drop legal challenge – but experts warn store could still go bust
FEARS were mounting last night over the future of House of Fraser and its 17,500 staff as it teeters on the brink of going bust.
The 169-year- old retailer is struggling to secure a funding lifeline after Sports Direct tycoon Mike Ashley appeared to back away from providing a rescue deal.
Experts have warned that the chain is now on the verge of collapse after a restructuring plan was scuppered last week.
The Chinese owner of Hamleys, C Banner, had promised to provide House of Fraser with £70million in funding if it agreed to close half its 59 stores.
But C Banner walked away over uncertainty surrounding the deal.
Retail consultant Richard Hyman said: ‘You get the feeling that administration is fairly imminent.’ Analyst Nick Bubb said: ‘I think it will be difficult for management to avoid putting the business into administration soon.’
Mr Ashley, 53, emerged as one of a handful of potential suitors interested in House of Fraser after reports revealed that he had offered the retailer a total of £ 50million in emergency funding.
But the retail mogul has cooled on the idea over fears the pensions regulator could get involved, the Sunday Times reported.
Although House of Fraser’s two pension schemes are wellfunded, any takeover would need the approval of the Pensions Regulator and the Pension Protection Fund.
If House of Fraser crashes into administration, it will be the fourth major retailer to collapse this year, joining Toys R Us, Poundworld and Maplin.
As many as 50,000 jobs have been lost from the high street in 2018 as Marks & Spencer, Mothercare and Carpetright are also forced to close stores.
House of Fraser, which was established in Glasgow in 1849 as a drapery shop, is currently the UK’s third biggest traditional department store chain.
It has struggled for high street sales as customers opt to shop online. The company declined to comment last night.
HOUSE of Fraser’s collapse looked imminent last night as rescue talks led by Sports Direct owner Mike Ashley deteriorated.
Fears about the department store’s future are growing following reports that Ashley is backing away over concerns about its pension funds.
Experts said administration would leave it vulnerable to ‘scavengers’ looking for a cut-price deal. The news leaves the future of its 17,500 staff at risk.
Reports emerged last month that Ashley had offered a £50m lifeline, but he is said to have had second thoughts, and is expected to withdraw his offer over concerns that he could be ‘crucified’ if anything went wrong with House of Fraser’s two defined-benefit pension schemes, The Sunday Times reported.
Although House of Fraser’s pension schemes have a surplus, a takeover would need the go-ahead from The Pensions Regulator and the Pension Protection Fund.
Last night, House of Fraser settled a legal challenge from a group of landlords against its restructuring proposals. They were unhappy with plan to close half its 59 shops in exchange for £70m in funding from a potential new Chinese owner, C Banner.
Law firms Begbies Traynor and JLL, which represent the group of landlords, confirmed the matter had been settled, allowing House of Fraser to go ahead with the store closures. But the retailer is still in desperate need of cash after C Banner walked away from the deal following a 70pc plunge in the firm’s share price, forcing it to issue a profit warning.
Experts warned that it was now likely to collapse. Retail analyst Nick Bubb said: ‘It will still be difficult for management to avoid putting the business into administration soon, with the scavengers gathering.
‘But there is a small chance that House of Fraser may now be able to rally enough support to press on with the store closure plan and raise some short-term funds.’
Retail consultant Richard Hyman said: ‘I think what is presented as a rescue will emerge, possibly after it goes into administration. Anyone putting any money in would want to do so unencumbered by debt and pension obligations. You get the feeling administration is imminent.’
Ashley’s retreat would narrow its options to a handful of potential saviours, including turnaround specialist Alteri Investors and Philip Day, who owns the Edinburgh Woollen Mill chain. But Day is thought to want to put it through insolvency to offset the risk involved in taking it on.
House of Fraser, which is owned by the Chinese conglomerate Sanpower, declined to comment.