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Chairman rejects House of Fraser refinance rumours

House of Fraser has denied speculation that it is considering refinancing the business.

A note from Numis analyst Andy Wade issued this week poured fuel on market speculation that the department store was looking at refinancing options, but House of Fraser chairman Don McCarthy said the note had been “misinterpreted”.

Wade’s note, which followed a meeting he had with HoF chief executive John King, said he expected HoF would have to do “some manoeuvring” to meet its covenant tests. It read: “We suspect that, with covenants set three years ago and based on pre-recession targets, some manoeuvring will be required to navigate quarterly [covenant] tests but, with solid trading, lower stock-holdings, reduced capital expenditure and net debt of just 3.1 x EBITDA, the business is in good position for the year.”

McCarthy said: “Every bank and business has quarterly tests on its banking covenants. We met our last with plenty of headroom and I’m not worried about meeting the next one. Like-for-likes are up. We have no plans to refinance.”

Numis estimated the retailer’s EBITDA would be “mid-£60 million” this year, adding that HoF had positive like-for-likes over the past couple of months and steady gross margin. It said with a covenantable net debt of about £200m, HoF was “not uncomfortably leveraged”.

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