House of Fraser plunged into problems as Chinese investors pull out

THE future of House of Fraser has been plunged into uncertainty after its potential Chinese saviour was forced to drop a £150 million share placing intended to fund a rescue deal.

C.banner, the Hong Kong-listed owner of Hamleys, said that a dive in its share price meant plans to raise funds to invest in the department store group had been “rendered impracticable and inadvisable”.

House of Fraser said yesterday that it was in discussions with alternative investors, said to include Sports Direct owner Mike Ashley, the former Rangers shareholder.

The Newcastle United owner controls an 11.1 per cent stake in House of Fraser and a near-30% stake in Debenhams.

House of Fraser also said it was “exploring options to obtain the required investment on the same timetable”.

C.banner’s investment was conditional upon House of Fraser, which employs more than 17,000 people, closing more than half its stores through the so-called Company Voluntary Arrangement (CVA).

However, the store closure programme was thrown off course when landlords issued a legal challenge, saying they were unfairly prejudiced by the process.

House of Fraser has previously described the restructuring proposal and investment from C.banner as the last viable option for the business, raising the prospect that it could now fall into administration.

A string of British retailers have either gone out of business or announced plans to close shops in recent months as they struggle with subdued consumer spending, rising labour costs, higher business property taxes and growing online competition.

Mike Ashley is understood to have approached the retail giant four weeks ago with an investment offer that could save jobs and stores.

The billionaire is also understood to have offered House of Fraser a £50 million loan.

Andrew Busby, of the consultancy Retail Reflections, said the chain should consider a merger with rival Debenhams in order to boost its chances of survival.

“House of Debenhams is becoming more and more of a reality that’s the best outcome for House of Fraser,” he said. “Unless you are Harrods or Selfridges the department store concept is not quite dead, but severely challenged.”

Richard Lim of Retail Economics described the development as a “real blow” for House of Fraser.

Other retailers undertaking Company Voluntary Arrangements in a bid to keep trading include New Look, Mothercare and Carpetright.

Restaurant businesses have also been seeking to cut their costs with store closure programmes.

Carluccio’s, Prezzo, Byron and Prezzo have all been pushing through CVAS this year.

House of Fraser’s collapse would also mean a major blow for the UK’S retail sector and for high streets around the country.

Britain’s economy has been hit in recent months by administrations from the likes of Toys R Us, Maplin, and Poundworld.

We are now exploring options