House of Fraser has today gained approved from creditors for its CVA, which will involve the closure of more than half of its stores and the loss of 6,000 jobs. However a leading figure from the property industry has reacted angrily to the news saying landlords are being “made to pay for the mistakes of the business owner“.
It was unclear whether House of Fraser would gain approval for its plans and landlords had complained that the vote, organised by adviser KPMG, had been structured unfairly to ensure it would be pushed through (CVAs require 75% approval from creditors by value). However House of Fraser CEO Alex Williamson, who joined the ailing business last year, said the CVA was the last viable option to prevent the business from collapsing.
Under the terms of the CVA, 31 of its 59 stores will close by early next year including its flagship on London’s Oxford Street. Some 2,000 House of Fraser staff will be affected along with a further 4,000 from brands and concessions.
Alongside the CVA, House of Fraser’s Chinese majority shareholder Nanjing Cenbest (part of Sanpower) will sell a 51% stake in the business to Hamley’s owner C.banner (also based in China) which plans to invest £70m into the remainder of the business.
Landlords are aggrieved they will take a hit while the business receives new funds and Mark Williams, president of Revo, the single body that represents all stakeholders in the UK’s £340bn retail and property sector including landlords, retailers and local councils, has called for the government to review CVA practices.
“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.
“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,” Williams said.
House of Fraser is the latest in a string of CVAs on the high street among retailers and casual dining chains. In the fashion space New Look, Select and Mothercare are all operating under CVAs. “This apparent ease with which some retailers are exiting leases entered into in good faith not only deters companies from investing in our town centres, it fundamentally undermines the UK legal system where contract is sacrosanct.
“Action must be taken now, and we have written to the Housing, Communities and Local Government Select Committee urging them to scrutinise the misuse of CVAs, holding retailers and their advisors to account by calling them to give evidence in front of this Committee’s MPs,” Williams added.