Landlords may launch bid to scupper House of Fraser CVA

House of Fraser has announced that it has gained approval from its creditors to enter into a Company Voluntary Arrangement (CVA) which will see the closure of 31 of its 59 department stores and the loss of around 6,000 jobs.

Landlords for the company have indicated their dissatisfaction with the plans and say they may launch a challenge to the arrangement which will see significant 50% rent reductions for 10 of the surviving stores and a 30% cut for those earmarked for closure. The landlords feel that they will take the biggest financial hit while investors will benefit from a £70m cash injection promised by a Chinese retailer in exchange for a 51% share in the company.

Ben Jones, partner and head of restructuring & insolvency at Bryan Cave Leighton Paisner, said “The approval of the CVA does not mean that the debate is over. Many questions remain including over the fairness of imposing compromises only on landlords and the fairness of the voting weight given to landlords, compared to other creditors, when only landlords are being compromised. Our focus remains on working with stakeholders across the industry to ensure that the CVAs are being used as intended: to effect rescues fairly across the stakeholder base.”

House of Fraser Chairman, Frank Slevin said “The approval of the CVAs is a seminal moment in House of Fraser’s history. We must now continue with the implementation of our restructuring plan. This is also an important milestone in the transaction with C.banner and moves us toward the completion of the capital injection first announced in May.”

CEO of House of Fraser Alex Williamson said “The CVA proposals have been approved by our creditors and we are grateful for their ongoing support and belief in the future of House of Fraser. This was clearly a difficult decision to take but is, ultimately, the only one to secure our future. Our focus is on supporting all of our affected colleagues and we are exploring every opportunity available to them working alongside the Retail Trust and the wider retail community.”