House of Fraser: landlords fight back
House of Fraser is facing legal action from a group of store landlords over its plan to close more than half its stores by next spring.
The landlords group, which filed a complaint via the Court of Session in Edinburgh, says that it was ‘unfairly prejudiced’ by last month’s CVA.
The group, who are being advised by accountancy firm Begbies Traynor and property advisory firm JLL, also alleges there were ‘material irregularities in the implementation of the House of Fraser CVA.’
The group argues it is unfair that the chain’s majority shareholder Nanjing Cenbest will receive £70m from selling shares to fellow Chinese company C.banner, of which the CVA was a prerequisite, while the landlords are hit financially by the closure of 31 branches.
‘It is our view, and that of our legal counsel, that landlords have been disproportionately affected during this CVA process; not only compared to other creditors, but also to how they could have been treated if alternative routes to rescuing the business were fully explored,’ the group said.
‘CVAs were designed as a means to rescue a business, not simply a tool to shed undesirable leases for the benefit of equity shareholders,” said Mark Fry of Begbies Traynor and Charlotte Coates of JLL. ‘It is our collective view that the retail CVA process in the UK has become fundamentally flawed and needs correcting.’
‘On the assumption that a challenge is filed in court, whilst we are disappointed, we look forward to robustly defending our position and we are confident that this will not affect our commercial plans,’ said House of Fraser.