The Reuben brothers have emerged as one of the parties who tried to block the restructuring of House of Fraser, documents reveal.
A series of high-profile creditors attempted to block the proposals, which include closing half of the department chain’s stores.
According to documents seen by City A.M., British Land, Derwent and the Reuben brothers’ Aldersgate Investments voted against the proposals.
One of the company voluntary arrangements (CVAs), concerning House of Fraser Limited, would have failed to pass without the votes of connected creditors. These include House of Fraser’s Pension Trustees and other companies connected to the retailer.
CVAs, a form of insolvency proceedings, are being increasingly used by struggling retailers as a way to close stores, but House of Fraser’s has been the most contentious restructuring deal to date.
Not all landlords opposed the plans, with Intu and Hammerson among those supporting the CVA.
One landlord, who has stakes in four stores, told City A.M. that House of Fraser had been “cynically advised” to “stretch the legislation” by reducing landlord voting rights.
As part of the process, landlord claims to voting were discounted by 75%. This is standard practice in CVAs, as the legislation allows the supervisor of the process, which in this case was KPMG, to decide on voting rights at their discretion.
A spokesperson for the joint supervisors from KPMG said: “Had the CVA not been proposed is was very likely the company would have gone into administration. As key creditors, landlords had a significant vote in the House of Fraser process. Indeed, had all landlords voted against the proposals, then they would not have gone ahead.”
The spokesperson added that the law dictates that votes in a CVA are based on the value of a creditor’s claim.
A landlord’s claim is technically “unascertained” as it relates to future rather than current liabilities. These should be valued at £1 for voting purposes but in practice, and as was the case for House of Fraser, the market always takes a more generous calculation approach.
Landlords whose claims are compromised by the CVA have the right to take back their stores, KPMG said.
According to City A.M., discussions between landlords and legal advisers are still ongoing, while those affected decide whether to challenge the CVA in court.
There is a 28-day window in which a challenge can be put forward, starting on the day the vote was passed. This means any landlords wanting to take action will need to do so in the next two weeks.
The retailer will now shut 31 of its 59 shops nationwide and impose huge rent cuts on 10 others that it intends to keep.
Up to 6,000 jobs are set to go as a result of the store closures, BBC News said.
The stores scheduled for closure, which include its flagship London Oxford Street store, will stay open until early 2019.
House of Fraser chief executive Alex Williamson said: “The CVA proposals have been approved by our creditors and we are grateful for their ongoing support and belief in the future of House of Fraser. This was clearly a difficult decision to take but is, ultimately, the only one to secure our future.”
DMZ wonders who the next big retail chain will be to succumb to the challenges facing the high street – namely falling consumer confidence, rising overheads and the growth of online shopping.
House of Fraser’s demise follows that of electronic chain Maplin and toy chain Toys R Us, which both collapsed into administration earlier this year.
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