House of Fraser at Carlisle is to close in seven months’ time as part of a company voluntary arrangement.
KPMG, appointed to advise House of Fraser in April, has put together a restructuring plan that involves the closure of 31 of 59 locations across the country, with only Manchester’s store remaining in the region.
The reduction of HoF’s store estate is a condition of the group securing new funds from C.banner, which agreed in May to become its majority shareholder, taking over from fellow Chinese company Nanjing Cenbest.
The CVA proposals were filed with the Court of Session in Edinburgh yesterday.
Will Wright, restructuring partner at KPMG, said: “The CVAs proposed by House of Fraser give the business a vital lifeline to avoid administration by renegotiating the lease terms of its UK-wide property portfolio, as part of a wider restructuring.
“The business has been impacted by the mounting pressures facing the UK high street, with the declining profitability of certain stores exacerbated by costly legacy leases which were originally negotiated many years ago.
“With trading conditions unlikely to materially improve in the short term, the future of House of Fraser is at significant risk unless steps to restructure the business both financially and operationally are taken.”
KPMG said that at 16 “Category One” stores, leases will be retained at current rates, while at a further 10 stores a reduced rent, equivalent to 75% of the current rent, will be sought. Two stores, one in Ireland and another held by a separate legal entity, are not included.
Of the 31 stores to close, a reduced rent equating to 30% of the current rent will be paid for the remaining seven months before closure. KPMG said: “It is important to stress that none of these stores will close on day one, and employees, business rates and suppliers will continue to be paid on time and in full for the duration of the closure period.”
At least 75% of creditor approval for each of the CVAs is required for them to proceed. The creditors will vote on the CVAs on 22 June. KPMG said that it will spend the coming weeks in further talks with key creditors.
Also included in the 31 stores under threat are two London stores, Oxford Street and King William Street, and the retailer’s Birmingham shop.