House of Fraser on the brink as backers pull out of deal

House of Fraser could be placed into administration if the ailing department store cannot find a backer, it has emerged.

Yesterday (1 August), China-based backer C.Banner pulled out of a deal to lend House of Fraser £70m, calling the deal “impractible and inadvisable”. The company pulled out of the deal after a sharp fall in its share price.

Now, reports in the national press, say that accountancy firm EY is being readied to place House of Fraser into administration if funds cannot be found.

If that happened, it would be the biggest high street failure since 30,000 jobs were axed as Woolworths ceased to trade. House of Fraser supports around 17,000 jobs in the UK.

Earlier this week we reported that Mike Ashley, the owner of Shirebrook-based Sports Direct, could be the unlikely saviour of House of Fraser.

Sky News says that House of Fraser advisers are in talks with Ashley over a £50m rescue deal for the stricken department store, with Ashley making the first move.

Ashley made his play at the beginning of July when it became apparent that a cash injection of £70m from the Chinese owner of Hamleys wouldn’t materialise for several months – time House of Fraser doesn’t have.

Sports Direct already owns 11% of House of Fraser. In a letter seen by Sky News, the company said it could help House of Fraser with “warehousing, online sales and the running of the business generally”.

In June, creditors backed House of Fraser’s plans to close more than half its stores.