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You can find the current article at its original source at https://www.theguardian.com/business/2018/jul/20/house-of-fraser-landlords-take-action-over-store-closures
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| House of Fraser landlords take action over store closures | House of Fraser landlords take action over store closures |
| (30 days later) | |
| House of Fraser is facing a legal challenge from a group of landlords over a plan to close more than half its stores by next spring. | House of Fraser is facing a legal challenge from a group of landlords over a plan to close more than half its stores by next spring. |
| The landlords, who filed a complaint via the court of session in Edinburgh on Friday, say that they were “unfairly prejudiced” during an insolvency process known as a company voluntary arrangement (CVA) that was approved by a majority of creditors, including landlords, last month. | The landlords, who filed a complaint via the court of session in Edinburgh on Friday, say that they were “unfairly prejudiced” during an insolvency process known as a company voluntary arrangement (CVA) that was approved by a majority of creditors, including landlords, last month. |
| The group, who are being advised by accountancy firm Begbies Traynor and property advisory firm JLL, also allege there were “material irregularities in the implementation of the House of Fraser CVA”. | The group, who are being advised by accountancy firm Begbies Traynor and property advisory firm JLL, also allege there were “material irregularities in the implementation of the House of Fraser CVA”. |
| The CVA plan involves the closure of 31 of House of Fraser’s 59 department stores, including the flagship in London’s Oxford Street. The closures will result in about 6,000 job losses from the 17,000-strong workforce and the company has warned the only alternative is to go into administration. | The CVA plan involves the closure of 31 of House of Fraser’s 59 department stores, including the flagship in London’s Oxford Street. The closures will result in about 6,000 job losses from the 17,000-strong workforce and the company has warned the only alternative is to go into administration. |
| Landlords and staff are entitled to be angry at House of Fraser | Nils Pratley | Landlords and staff are entitled to be angry at House of Fraser | Nils Pratley |
| The statement from the landlord group said it was “unjust” that House of Fraser’s majority shareholder, Nanjing Cenbest, which is part of China’s Sanpower conglomerate, was set to receive £70m for some of its shares in the ailing department store from a new investor, C.banner, as part of a wider rescue deal while landlords creditors take a financial hit. | The statement from the landlord group said it was “unjust” that House of Fraser’s majority shareholder, Nanjing Cenbest, which is part of China’s Sanpower conglomerate, was set to receive £70m for some of its shares in the ailing department store from a new investor, C.banner, as part of a wider rescue deal while landlords creditors take a financial hit. |
| “It is our view, and that of our legal counsel, that landlords have been disproportionately affected during this CVA process; not only compared to other creditors, but also to how they could have been treated if alternative routes to rescuing the business were fully explored,” the group said in a statement. | “It is our view, and that of our legal counsel, that landlords have been disproportionately affected during this CVA process; not only compared to other creditors, but also to how they could have been treated if alternative routes to rescuing the business were fully explored,” the group said in a statement. |
| They complained that they had not been properly consulted about the CVA or given sufficient information about how House of Fraser planned to trade over the coming months. | They complained that they had not been properly consulted about the CVA or given sufficient information about how House of Fraser planned to trade over the coming months. |
| The legal action is seen as a fightback by landlords against the increasing use of CVAs, which have become commonplace in recent months, with a string of struggling retail and restaurant businesses using them to offload unwanted outlets or cut rents. | The legal action is seen as a fightback by landlords against the increasing use of CVAs, which have become commonplace in recent months, with a string of struggling retail and restaurant businesses using them to offload unwanted outlets or cut rents. |
| “CVAs were designed as a means to rescue a business, not simply a tool to shed undesirable leases for the benefit of equity shareholders,” said Mark Fry of Begbies Traynor and Charlotte Coates of JLL. “It is our collective view that the retail CVA process in the UK has become fundamentally flawed and needs correcting.” | “CVAs were designed as a means to rescue a business, not simply a tool to shed undesirable leases for the benefit of equity shareholders,” said Mark Fry of Begbies Traynor and Charlotte Coates of JLL. “It is our collective view that the retail CVA process in the UK has become fundamentally flawed and needs correcting.” |
| The CVA is a prerequisite of an investment deal that C.banner agreed with Nanjing Cenbest, chaired by one of China’s richest men, Yuan Yafei. | The CVA is a prerequisite of an investment deal that C.banner agreed with Nanjing Cenbest, chaired by one of China’s richest men, Yuan Yafei. |
| C.banner has agreed to pay Nanjing Cenbest £70m as part of the deal, which will give it a 51% stake in House of Fraser. It has also pledged to invest a further £70m into the department store’s revival plan. | C.banner has agreed to pay Nanjing Cenbest £70m as part of the deal, which will give it a 51% stake in House of Fraser. It has also pledged to invest a further £70m into the department store’s revival plan. |
| A House of Fraser spokesperson said: “We note the statement made by Begbies Traynor and JLL on behalf of a group of landlords but at this stage we have not received anything formally. On the assumption that a challenge is filed in court, whilst we are disappointed, we look forward to robustly defending our position and we are confident that this will not affect our commercial plans.” | A House of Fraser spokesperson said: “We note the statement made by Begbies Traynor and JLL on behalf of a group of landlords but at this stage we have not received anything formally. On the assumption that a challenge is filed in court, whilst we are disappointed, we look forward to robustly defending our position and we are confident that this will not affect our commercial plans.” |
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