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HoF administrator halts supplier payments

House of Fraser suppliers and concessionaires are urging Sports Direct to “do the right thing”, as they count their “substantial” losses for payments due before the department store chain went into administration last week.

Drapers understands that concessionaires and suppliers – including landlords – are collectively owed at least £70m in payments due this week relating to sales in June and July. However, House of Fraser administrator EY has said the amounts owed will not be paid.

Sports Direct paid £90m to acquire HoF, its stock and stores from the administrator last week in a pre-pack administration deal. HoF is not legally obliged to make payments for any goods sold before the transaction, leaving suppliers and concession operators facing big debts.

A spokesman for EY said: “These are unsecured claims and as such will not be paid. However, in due course they will receive a dividend on their accepted claims from the prescribed part.”

Suppliers told Drapers the shortfall could push some smaller business over the edge.

“It is a nightmare,” said one supplier. “It is going to send so many companies under. We are owed a lot of money and they have stopped payments. Our factory is going to go under as a result. No one knows what’s going on.

“It is going to ruin the high street, this is very serious. I’m scared of what’s going to happen. We as an industry have to stand up and say something. Ashley should honour [the] payments.”

Nigel Lugg, executive chairman of Prominent Europe, which supplies HoF with the Chester Barrie menswear brand, said he thinks suppliers could receive less than 2p or 3p in the pound of what they are owed, which could push some firms into receivership.

A concession holder told Drapers the payments relate to June and July, when HoF was on Sale, so the sums it is owed are substantial.

Another described the situation as a “shambles”, adding that the administrators had “handled the situation badly”.   

Another supplier added: “Yet again, the banks get the majority of their money back but it is the suppliers that are stuffed. It needs to stop.”

In a letter sent over the weekend, seen by Drapers, Sports Direct asked concession partners to continue with “business as usual” over the next few days. But a typo in the letter left many of its partners more bemused than reassured.

The group said it will provide a guarantee to pay for all goods sold in the days since the acquisition on the same trading terms as previously agreed with HoF, until the end of August 2018 in the first instance. But just a few hours later, the sportswear giant sent an update that the guarantee would stand until August 2019.

The letter, sent to concessionaires by Sports Direct deputy chief financial officer Chris Wootton, also said: “We appreciate that it has been a tough time for House of Fraser and its partners recently, and we are committed to creating stability as soon as possible.”

He indicated that a number of the Sports Direct team have already joined their new colleagues at HoF, and the company will be in touch over the coming days to make plans for the future.

“We are excited and enthusiastic about the future for House of Fraser as one of the UK’s premium fashion, home and beauty retailers,” he wrote.

Philip Day, owner of Edinburgh Woollen Mill Group, urged Ashley to “do the honourable thing and pay all suppliers and concessionaires on date and in full”, given that he bought the chain “conservatively”. Day said he had put in a rival bid for HoF of £100m and would have covered the chain’s pension liabilities.

“Many generations of employees and suppliers, both big and small, have depended on House of Fraser for their livelihoods,” said a spokesman for Day. “The concessionaires have helped keep House of Fraser trading over the last year, and the industry is now looking to Mr Ashley to do the right thing.”

Drapers’ request for comment from House of Fraser was referred to the administrator, EY.

 

 

 

Readers' comments (1)

  • If you were going to do the right thing, you wouldn’t purchase after going into administration.

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