House of Fraser has reached an out-of-court settlement with a group of landlords that had challenged its CVA and planned store closures, it was announced last night.
The group of landlords had filed petitions to Scottish courts last month after the department store chain announced it would be shutting down 31 of its 59 stores as part of its CVA restructuring plans.
The details of the settlement were not disclosed.
A spokesperson for the joint supervisors of the House of Fraser CVAs said: “The joint supervisors can confirm that there has been a settlement to the legal challenge to the House of Fraser CVAs.
“This commercial settlement has been reached to avoid the costs of litigation, and allows the companies to continue its investment process without the CVAs being subject to the risk of further legal proceedings.
“The joint supervisors will continue to monitor the progress of this investment process and will update creditors as appropriate.”
Mark Fry of Begbies Traynor and Charlotte Coates of JLL, who have been advising the group of House of Fraser landlords throughout the CVA process and legal challenge, confirmed the settlement agreement.
They said: “Although we will not have our day in court, we are pleased with the outcome and hope that our landmark legal challenge sends a clear message to any other companies considering a CVA, on the importance of transparency and fair treatment for all creditors throughout a CVA process.
“Landlords are always willing to enter into a proper dialogue with companies and their advisers with the aim of rescuing a business. However, the retail CVA process in the UK has become increasingly misused and prejudiced against landlords 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.
“It remains our belief that applying a 75% arbitrary discount to the value of landlords’ claims is not the market norm and has no basis in law. We believe that thanks to our actions, landlords in future CVAs will be in a far stronger position to challenge what we regard as unfair treatment and demand greater transparency from companies and their nominees from the outset.”
It was also reported over the weekend that Sports Direct owner Mike Ashley is unlikely to proceed with a rescue deal for House of Fraser because of its pension funds.
According to The Times, Ashley said he had “no intention” of extending emergency financing to the chain.
Rumours emerged last week that the Sports Direct founder was interested in investing in the department store chain but reports over the weekend indicate otherwise.
It was also revealed last week that Chinese retail group C Banner called off its plans to invest £70m in House of Fraser.