House of Fraser creditors approve CVA

The majority of House of Fraser’s creditors have approved the department store’s proposals to close 31 stores as part of its company voluntary arrangement (CVA) insolvency process. More than 75% of creditors gave the retailer’s two CVA proposals the green light on 22 June. Precise percentages were not disclosed. The outcome will result in 3.3m sq ft of empty space on the high street, according to Radius Data Exchange. It will also affect 2,000 jobs and a further 4,000 brand and concession partners. It is anticipated the stores scheduled for closure will remain open until early 2019. HoF aimed to reduce its total estate of 59 stores across the UK and Ireland to 28 stores. The proposals divided its total store count into three categories. For 16 ‘Category 1’ stores, the leases will be retained at current rents. For a further 10 ‘Category 2’ stores, the department store sought rent cuts of up to 25%. For the remaining 31 stores, HoF aimed to slash its rent bill by 70%, to be paid for seven months before the stores will close. Commenting on the result of the vote, Frank Slevin, chairman of House of Fraser, 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.” Alex Williamson, chief executive of House of Fraser, added: “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.” Will Wright, restructuring partner at KPMG and joint supervisor of the CVA, said that the approval “provides House of Fraser with the breathing space it needs to proceed with its proposed operational restructuring plan across a smaller core portfolio of stores”. The reaction The result has been met with a backlash from retail trade organisation Revo, which has urged the Housing, Communities and Local Government Select Committee to scrutinise the CVA process and hold retailers and their advisers to account, by calling on them to give evidence to its MPs. Mark Williams, president of Revo, blasted the “apparent ease” with which retailers are exiting their leases previously entered into “in good faith”. Williams argued that this in turn has deterred companies from investing in town centres and undermines the UK legal system, where “contract is sacrosanct”. He said: “The fact that House of Fraser is able to proceed with such a fiercely opposed CVA underlines that this legislation is completely broken and needs urgent review. READ MORE: Surrey Heath comes out fighting on House of Fraser buy “Landlords alone – many of which are pension funds and local authorities – are being made to pay for the mistakes of the business owners, and the government’s failure to reform the business rates system. The impact will be felt up and down the UK in town centres and on high streets.” Ben Jones, partner and head of restructuring and insolvency at law firm 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.” To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette