House of Fraser creditors approve plans to close stores and cut 6,000 jobs
- Credit: Archant © 2004
House of Fraser has been given approval by creditors to close 31 stores, resulting in up to 6,000 job losses.
The department store will undertake the 31 store closures through a Company Voluntary Arrangement (CVA), which will also allow it to secure rent reductions on its remaining shops.
Closures will affect up to 2,000 House of Fraser staff and a further 4,000 across brands and concessions. However, its outlet in Norwich's Chapelfield shopping centre is one of the stores to have been spared the axe.
Landlords had publicly hit out at the CVA, complaining that they are being forced to stomach a financial hit at the same time as House of Fraser enjoys new investment.
The CVA needed the support of 75% of House of Fraser's unsecured creditors.
The CVA comprises two legal entities, House of Fraser Stores, which contains the retailer's main operating entities, and House of Fraser Limited.
READ MORE: Could shaky foundations and legacy costs see House of Fraser crumble?Advisers to House of Fraser and the business's lenders had been contingency planning for a full administration of the business, should both parts of its CVA fail.
This would have triggered a sale process for the business. Sports Direct chief Mike Ashley, who owns 11% of House of Fraser, had been widely tipped to make a swoop on the department store.
The department store earlier this week secured breathing space from its lenders. Following discussions with HSBC and Industrial and Commercial Bank of China, it conditionally agreed an extension to a £125m term loan and a £100m revolving credit facility, sources told the Press Association.
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It is thought the extension of the loan will give House of Fraser more than a year to restructure and improve its trading performance. The loans will now fall due in the fourth quarter of 2020.
The loan extension is also conditional on House of Fraser receiving £70 million from Hamleys owner C.Banner, which is buying a 51% stake in the business and injecting new capital.