A legal challenge by landlords against House of Fraser’s plan to close more than half its stores is set to be heard on 14 August, potentially easing the way for a cash injection to save the struggling department store business from collapse.
House of Fraser is battling for survival after Wednesday’s decision by the Chinese owner of Hamleys, C.banner, to pull out of a plan to invest £70m in the ailing retailer and buy a majority stake.
Resolution of the legal battle with landlords could be a vital step towards securing an urgently required £50m of new funding. The department store’s chief executive, Alex Williamson, has said that the closure of 31 of House of Fraser’s 59 stores was the “only viable option” to secure the future of the business.
The company is in talks with a number of potential investors understood to include Mike Ashley, the boss of Sports Direct, and Alteri, the former owner of Jones Bootmaker. Philip Day, the owner of Edinburgh Woollen Mill, Jaeger and Austin Reed, and restructuring firm Hilco, the group which recently bought DIY chain Homebase, are also thought to be taking a look.
House of Fraser is looking to secure either a short-term loan or a long-term investor or buyer to stave off a fall into administration.
The retailer urgently needs cash as it struggles to meet its quarterly rent bill of nearly £25m which is due in late September, fund the purchase of stock and its monthly payroll.
Industry experts believe a rescue deal is highly unlikely given tough trading conditions and the high cost of updating House of Fraser’s stores and mending its troubled online business.
However, fighting off the legal challenge to the store closures, which is to be heard in Edinburgh’s court of session, is thought likely to give it a better chance for survival.
C.banner partly blamed its withdrawal on the legal battle with landlords which has delayed House of Fraser’s store closure plan, arranged via an insolvency procedure known as a company voluntary arrangement.
The hearing, which could last several days, will consider a complaint filed by five landlords who have been working with advisory firms Begbies Traynor and JLL. House of Fraser said it was “ready to robustly defend its position” at the legal hearing.
