Accountancy firm KPMG has accrued losses of £277,533 after being paid just less than half the fees it was owed by House of Fraser for work on its company voluntary arrangement (CVA).
Drapers understands that KPMG was paid a total of £200,000 out of £477,533 in fees for managing the CVA for two HoF companies, House of Fraser (Stores) and House of Fraser Ltd.
Under the CVA proposals outlined by KPMG as part of the takeover of HoF by Chinese investor C Banner, 31 of 59 HoF stores would have closed. However, after the CVA was approved, it was challenged in court by a group of HoF landlords. The legal challenge meant that extra time accrued by KPMG almost doubled the cost of administering the CVA.
The legal action was later dropped after HoF pledged to pay a total of £1m to five landlords involved in the challenge. Landlords were paid £200,000 of the £1m settlement before the department store chain went into administration on 10 August.
KPMG sent a letter to holders of claims against HoF on 20 August stating its management of the CVA process was complete. It stated that it had incurred time costs of £306,365 for the management of the House of Fraser (Stores) CVA, which represented 511 hours of work at an average rate of £600/hour. This was more than double the estimate provided at the time of the CVA proposal.
The letter states: “A costs estimate of £150,000 was provided at schedule 4 of the CVA proposal. However, significant costs were incurred following the challenge to the approval of the CVA.
“Fees totalling £150,000 have been paid directly by the Company [House of Fraser]. No further remuneration will be paid.”
The management of the HoF Ltd CVA accrued costs of £171,168, of which £50,000 was paid.
KPMG was also listed as a creditor for £47,000 of debt on administrator EY’s report on HoF, although this debt is not believed to be linked to the CVA costs.
KPMG declined to comment. Administrator EY has been contacted for comment.