House of Fraser Seeks Administrators as Rescue Talks Stall
(Bloomberg) -- Department-store chain House of Fraser Ltd. has decided to pursue insolvency proceedings after rescue talks bogged down, putting 17,000 jobs at risk and deepening the U.K.’s retail crisis.
The move comes as discussions with investors and its main secured creditors haven’t “concluded in a solvent solution,” the company said in a statement Friday. The retailer has been holding last-ditch talks after a would-be savior, China’s C.banner International Holdings Ltd., shelved plans to buy a majority stake.
The retailer has been in discussion with lenders and potential investors including Philip Day, owner of Edinburgh Woollen Mill, and Sports Direct International Plc, which was proposing to place the company into a so-called prepackaged administration with a plan to buy assets, the Financial Times reported. Alteri, Apollo Global Management LLC’s unit investing in distressed lenders, has also been in talks with the retailer, people familiar with the matter said earlier this week.
House of Fraser’s struggle to raise cash is another dark turn in the British retail crisis, after the collapse of brick-and-mortar institutions such as Maplin Electronics, the U.K. arm of Toys “R” Us and department-store operator BHS. Store chains are being crippled by pressure from online retailers such as Amazon.com Inc., exacerbated by a rise in costs stemming from the pound’s Brexit-induced weakness.
Mid-market department stores like House of Fraser have been hit particularly hard, with rivals Debenhams Plc and Marks & Spencer Group Plc shrinking store space as their online businesses have been slow to take off.
House of Fraser, founded as a textile shop in Glasgow 169 years ago, resolved to appoint individuals from Ernst & Young as administrators, according to Friday’s announcement, in a process similar to U.S. Chapter 11 proceedings. Stores will remain open for now, it said.
“Significant progress has been made towards completing a sale of the group’s business and assets,” according to the filing. “The proposed administrators are expected to continue to progress those discussions with a view to concluding a transaction shortly after their appointment.”
In a bid to avert collapse, House of Fraser in June laid out plans to close more than half of its 59 stores in the U.K. and Ireland, prompting protests from some landlords.
C.banner shelved plans to raise funds for the purchase of a majority stake earlier this month, citing a plunge in its stock price. The company had pledged to pump 70 million pounds ($89 million) into House of Fraser after taking control from Nanjing Xinjiekou Department Store Co., a subsidiary of Chinese conglomerate Sanpower Group.
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