Retailer’s rescue deal falls through
A rescue deal to save struggling retailer House of Fraser has been put into doubt after a potential investor cancelled its fundraising plans to become a major shareholder.
C.banner, a retailer of footwear brands in China, was planning to invest £70m into the British firm but cancelled its planned share placing due to falls in its share price. It had agreed in May to buy a 51% stake in House of Fraser but has now issued a profit warning of its own.
House of Fraser had agreed to close stores as part of the rescue deal. In June, creditors approved a restructuring plan which would see 31 of its 59 stores close early next year, resulting in 6,000 job losses.
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.
However, the retailer told Reuters: “In light of C.banner’s announcement… House of Fraser is in discussions with alternative investors and is exploring options to obtain the required investment on the same timetable.”
Earlier this week we reported that Mike Ashley, the owner of 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. Sports Direct already owns 11% of House of Fraser.
House of Fraser is one of many UK retailers this year to have been hit by increasing online competition, higher consumer spending, rising labour costs and higher business property taxes; leading to the administration of several high street names including Poundworld, Toys R Us, Maplin.
