Legal action threatened in wake of proposed House of Fraser CVA
The recently announced rescue plan for department store, House of Fraser, could be doomed to failure before it even gets off the ground, after it was revealed landlords affected by it were planning legal action.
Westfield, along with a group of other property corporations, is said to be looking into challenging the retailer’s plans to close more than half of its premises throughout the country, which were announced as part of a Company Voluntary Arrangement (CVA).
For the Company Voluntary Arrangement to go ahead, it must receive the backing of at least 75 per cent of House of Fraser’s creditors. The landlords are seeking to block the CVA, claiming that it treats them in unequal terms compared to the other creditors.
A business restructuring firm advising the group has said that if the CVA plans go ahead, the landlords would be the ones taking “all the pain” from the rent cuts that would be necessary to prevent the retailer’s financial collapse. Other creditors, they say, can vote on the CVA without fear of similar harm.
House of Fraser plans to reduce its number of department stores to 28, a proposal that puts 6,000 jobs at risk. The Company Voluntary Arrangement also proposes to reduce the rent on 10 of the remaining outlets.
If the CVA is passed, C.banner, the parent company of Hamleys, is set to buy a 51 per cent stake in the business and inject £70 million into its turnaround.
Alex Williamson, the chief executive of House of Fraser, warned that the company would collapse if the CVA failed to go through.