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HoF CVA speculation mounts as KPMG appointed

House of Fraser has drafted in KPMG as its financial adviser to examine a range of options on how it can speed up its restructuring, including a potential Company Voluntary Arrangement (CVA).

The department store has approached landlords for rent reductions in recent months on a “mix” of different agreements including rent reductions, on a store-by-store basis.

A spokeswoman for HoF said: “House of Fraser can confirm  we have appointed KPMG and are working closely with them to look at options that best support our transformation programme.” 

KPMG declined to comment. 

The news fuels ongoing speculation in the property market that a CVA could be on the cards for the department store, which operates 59 shops in the UK.

Sources said a CVA was not “inevitable” but highlighted that it could be one possible outcome.

One property source told Drapers: “There’s just no clear messaging from HoF but a CVA really wouldn’t surprise me. They have some very expensive stores – some of their rents are very high for some of their locations.”

Another added: “I think HoF will look at a CVA. It has a small estate but you have to look at the whole portfolio. They have massively long leases and are hugely overrented on space they don’t need.”

“I think a CVA is almost guaranteed - it certainly wouldn’t surprise me,” said another. ”It’s just a question of timeframe – whether it’s now, or further down the line. Trying to sell some of the business to third-party interests might get them out of jail.

“Its locations are not as good as Debenhams, [which have] new anchor retailer outlets where HoF has got a lot of old historic [sites] that are not necessarily good for retailing. There are a lot of constraints on what they can do around them.”

However, others were more doubtful. A property source noted that while a CVA is “a potential solution”, he was not sure if HoF “necessarily meets the criteria required”.

He also added that it would be “difficult with their ownership structure”, which remains up in the air.

It emerged last month that the Nanjing Xinjiekou Department Store Co, a subsidiary of Sanpower Group that owns 89% of HoF, is preparing to sell a 51% stake to a Chinese tourism development company, Wuji Wenhua.

“But you never know. I wouldn’t say a CVA is inevitable – I think it’s more likely another buyer will come in, inject some cash and get it going again, while looking at store list, waiting for underperforming leases to run out and get out of them. It’s a good brand,” he added.

HoF’s lenders, thought to include HSBC, have appointed EY as its advisers. Rothschild is acting on its debt refinancing.

Readers' comments (1)

  • A CVA is nailed on, unless another party wants to come in a lose money. However, the CVA will not ultimately solve their problems as their structure is totally flawed.

    Suppliers must continue to beware and ask themselves do they really need HOF business with all the dangers that go with it? The answer for many will be no.

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