Legal action set to delay House of Fraser CVA and investment cash

By

Sandra Halliday

Published
Jul 27, 2018

The legal action being brought by House of Fraser landlords is set to delay the struggling retailer’s CVA and means that the £70 million cash injection that the company is getting from its new majority owner could be delayed too.

That would mean a cash squeeze on the company as it enters the new autumn/winter season.

The legal challenge is happening through the Scottish courts with press reports saying that some suppliers are making emergency plans in case the chain collapses into administration. This could happen because the company is due to pay a major rent bill in late September. Without the £70 million that C.Banner will pump into the business when it buys control from Sanpower-owned Nanjing Cenbest, there is a widespread assumption that the company may not have the cash to pay that bill.

Thousands of jobs would be at stake in the event of a collapse, but how likely is that to happen? That's unclear at the moment. We know that C.Banner’s involvement is dependent on the CVA plan being put into action meaning more than half of the chain’s stores will be closed in early 2019.

Full details of what was due to happen were meant to be sent to C.Banner shareholders this week. 

But on Thursday, in a Hong Kong Stock Exchange note, the Chinese company said that details wouldn't be available until the end of October due to the court action.

The action by landlords is based on their belief that they were “unfairly prejudiced” in the insolvency process and that there were “material irregularities in the implementation of the House of Fraser CVA”.

House of Fraser is planning to “robustly defend” its actions, but the process could take several months and with C.Banner’s share price having fallen sharply in recent weeks for a number of different reasons, there's speculation that it might want to focus on issues closer to home than mending a broken House of Fraser.

Sources told the Guardian that if C.Banner pulled out of the deal, HoF might try to tap its current majority owner or its existing lenders for new cash. But they also believe there is a chance that C.Banner could waive its requirement that the CVA is finalised before it makes it investment.