House of Fraser’s CVA plan hit by legal battle
HOUSE of Fraser’s plan to save the business by shutting half its stores has been hit with a legal challenge from property landlords. A group of landlords have filed a petition in the Scottish courts, claiming they have been treated unfairly through the department store chain’s restructuring plan.
The troubled retailer had secured approval from creditors in June for a Company Voluntary Arrangement (CVA), a lifeline designed to reduce costs by cutting rents and closing stores. It put 6,000 jobs in the firing line by allowing the company to close 31 of its 59 UK and Ireland sites and slashing the rents on a further 10.
The group, represented by restructuring firm Begbies Traynor and property agency JLL, have alleged “unfair prejudice” and “material irregularities” in how the CVA has been implemented.
House of Fraser said they were confident it would not “affect its commercial plans”. A statement from the landlord group said: “Our group believes that certain landlords have been unfairly prejudiced during this process and that there have been alleged material irregularities in the implementation of House of Fraser’s CVA.”
House of Fraser was advised by accountancy giant KPMG over the CVA, which won the backing of more than 75pc of creditors. Under the CVA proposals, China’s C.banner International Holdings plans to buy a 51pc stake in House of Fraser from majority shareholder Nanjing Cenbest and pump in £70m of new capital to help fund its revival. As part of the deal, Nanjing Cenbest will also receive £70m from C.banner for some of its shares in the retailer.
The landlord group added: “We strongly believe it to be unjust for the existing shareholder in House of Fraser to receive £70m of value, the details of which were not communicated initially, whilst certain landlord creditors are shouldering the financial impact of the process.”
Among the landlords in the group are Lunar Altrincham, Autumn Properties and Eden Commercial.
A House of Fraser spokesman said: “We have not received anything formally. On the assumption that a challenge is filed in court, whilst we are disappointed, we look forward to robustly defending our position.”