Beleaguered House of Fraser calls on lenders for extra £50m
RETAILER House of Fraser has approached lenders for an extra £50 million as part of its overhaul of the chain that includes closing more than half its stores.
The company sent letters to bondholders on Friday which it said were part of proposals that are ‘central to the ongoing significant restructuring of the business’.
It follows a bitter reaction from landlords to its store closure plan, also known as a Company Voluntary Arrangement.
More than half its 59 stores will close, with the loss of 6,000 jobs, leaving it with 28 outlets.
The chain told bond holders that new Chinese investor C.banner would put ‘significant’ funds into the business – a move described as ‘vital’ to House of Fraser’s future.
But it added that it also wanted the loan facility which it would call on ‘in certain circumstances’ in the future.
The restructuring is the latest attempt by a high street retailer to reverse a decline that has also seen Mothercare and Carpetright strike similar deals. Others such as Toys R Us, Maplin and Poundworld have had to call in administrators.
House of Fraser chairman Frank Slevin said: ‘This is a step on a journey. The team now need to get on and implement the transformation of the business.’ Last week, its rival Debenhams issued a profit warning. Chief executive Sergio Bucher spoke of ‘exceptionally difficult times’, adding: ‘We don’t see these conditions changing in the near future.’
Analysts said they had cut full-year profit forecasts from £50 million to £35 million – that compares with £114 million profit two years ago.
Debenhams finance director Matt Smith told analysts in April the chain did not risk breaching its banking covenants unless annual profit dropped below £20 million.