House of Fraser plan to close more than half its stores backed by creditors
Creditors have backed department store chain House of Fraser’s plans to close more than half its stores. High Street landlords were unhappy with the plan as they will have to shoulder the burden of financial losses, but they were outvoted.
The retailer will now go ahead and shut 31 of its 59 shops nationwide, and also impose huge rent cuts on 10 others that it intends to keep. Up to 6,000 jobs are set to go as a result of the store closures.
The vote was seen as a make-or-break moment for the 169-year-old business. If the rescue plan had failed, administration was likely.
In all, 2,000 House of Fraser jobs are set to go, along with 4,000 brand and concession roles. The stores scheduled for closure, which include its flagship London Oxford Street store, will stay open until early 2019, House of Fraser has said.
In May, House of Fraser’s Chinese owners, Nanjing Cenbest, reached a conditional agreement to sell a 51% stake to the Chinese owner of Hamley’s, C.banner. The sale was conditional on the restructuring plan being approved.
“Following the restructuring, House of Fraser will have a more sustainable cost base and a platform for future growth to deliver an improved customer proposition,” the company said in a statement.
CVAs are being increasingly used by struggling retailers as a way to close stores, but House of Fraser’s has been the most contentious restructuring deal to date. Landlords argue that CVAs are being abused as a quick way to cut rents and want the government to launch an urgent review into them.
In order to be enacted, CVAs have to be approved by 75% of unsecured creditors, but landlords’ voting power is reduced because of the way in which insolvency rules are applied.
House of Fraser chief executive 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.”