House of Fraser tries to secure backing of landlords
House of Fraser bosses are scrambling to secure the backing of furious landlords for the retailer's radical store closure plan following a volley of criticism.
Earlier this week, Northern Ireland solicitor Kieran McGarrigle of Arthur Cox revealed that landlords in the province were seeking legal advice on how to counter the growth in retailers seeking rent cuts through a Company Voluntary Arrangement.
House of Fraser is the latest chain to seek approval for a CVA. The restructuring plan also allows store closures as well as rent cuts. It has one store in Northern Ireland as the anchor tenant of Victoria Square Shopping Centre. But the chain has not revealed which of its 59 UK stores will be shut.
It has now emerged House of Fraser chiefs met with landlord representatives the day after a public backlash over the CVA proposals earlier this month.
Landlords were infuriated by the retailer's proposal because it simultaneously announced an injection of capital from a new Chinese investor, the Hamleys owner C.banner.
They were outraged House of Fraser would argue it was financially distressed as a pretext for ditching its rent obligations, despite having won new backing from China.
At the crunch meeting, brokered by House of Fraser's restructuring adviser KPMG, the retailer's representatives expressed surprise at the strength of the response from landlords, and said they were keen to address any outstanding issues.
House of Fraser also explained it had not engaged landlords in discussions earlier, which is considered best practice when pursuing a CVA, because the rules of the Hong Kong Stock Exchange prevented it.
The discussions between the two sides have been described as constructive, but it is not known whether House of Fraser will arrange a further meeting to formally put its proposal to landlords, or whether the company will consider their concerns.
Mr McGarrigle, finance partner at Arthur Cox, said: "Landlords are becoming understandably concerned by the developments in the use of CVAs varying the terms of lease and tenants obligations to them."
He said the growth in CVAs could hit the wider investment market. "The more CVAs we see, the more nervous banks will get locally about funding commercial development with a large retail client."