House of Fraser chain goes into administration

Silvia Morton
August 11, 2018

The deal was struck through a pre-pack administration process, where a company is put into administration before a new buyer cherry picks the best assets.

"The directors of the group's operating companies, House of Fraser (Stores) Limited, House of Fraser Limited and James Beattie Limited (the "Operating Companies"), have therefore resolved to seek the appointment of administrators".

Some 17,000 staff have been informed that they will be transferred over from House of Fraser to Sports Direct. This will benefit both House of Fraser and Flannels in the luxury sector. A self-made billionaire who also owns the Newcastle United football club, Mr Ashley is a colourful figure on the UK retail scene, describing himself in courtroom testimony previous year as a "power drinker" with a penchant for late-night pub antics. Our deal was conservative, consistent and simple.

A spokesperson for House of Fraser said this was "only a temporary situation and will be resolved".

Mr Ashley beat off competition from retail rival Philip Day, the billionaire owner of Edinburgh Woollen Mill.

It is unclear what Mr Ashley's plans are for the chain - but the move could in theory offer a reprieve for staff and customers.

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In an announcement on the Luxembourg Stock Exchange earlier this morning, where its bonds are listed, House of Fraser had said "discussions with interested investors and its main secured creditors have not concluded in a solvent solution". The advantages brought by the warehouses and logistics already managed by this group will be an important key in the recovery of the House of Fraser's fortunes.

Prior to its collapse, Mr Ashley had held an 11 per cent stake in the department store chain.

A string of United Kingdom retailers have either gone out of business or announced plans to close shops this year, as they struggle with subdued consumer spending, rising labour costs and higher business property taxes as well as growing online competition, particularly from Amazon.

Sports Direct wrote to HoF's management last month to set out the terms of a rescue deal, saying it was willing to structure a transaction on similar terms (subject to due diligence to confirm the level of investment/cash injection required) to one proposed by the Chinese owner of Hamleys.

The company saw its business rates bills rise £3.99 million to £30.24 million this year following a Government revaluation, according to research group Altus. "Turning around the business will not come easy".

Another first was that it was the retailer's first sustainable and green store.

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