House of Fraser CVA faces legal challenge from landlords in Scotland
A group of landlords in Scotland have filed a petition in the Scottish Courts which challenges House of Fraser’s CVA proposals.
The landlords argue that the proposals are unfairly prejudiced against certain creditors and have also highlighted what they say are material irregularities in the implementation of the CVA.
The group is being represented by restructuring firm Begbies Traynor and the property agency JLL.
In a statement, Mark Fry of Begbies Traynor and Charlotte Coates of JLL, said: “We strongly believe it to be unjust for the existing shareholder in House of Fraser to receive £70 million of value, the details of which were not communicated initially, whilst certain landlord creditors are shouldering the financial impact of the process.
“It is our view, and that of our legal counsel, that landlords have been disproportionately affected during this CVA process; not only compared to other creditors, but also to how they could have been treated if alternative routes to rescuing the business were fully explored.”
The landlords said that as yet they have received no information on how the department store chain will trade over the next seven months and received no guarantees that the business will continue, which left them unable to “reasonably assess” how successful a future rescue plan will be.
Fry and Coates added: “It is our collective view that the retail CVA process in the UK has become fundamentally flawed and needs correcting. Applying a 75% arbitrary discount to the value of landlords’ claims has no basis in law and impacts the likely outcome of the vote given that those landlords who will lose out have their voting rights and ability to object or negotiate severely curtailed. The application of the discount clearly means that dissenting voices are more easily silenced.”
House of Fraser announced last month that its CVA proposals had been approved by its creditors.
The new followed the company’s announcement of 2 May in which it said that C.banner had agreed to acquire a 51% stake in House of Fraser and inject significant new capital on condition that the business reduced its store portfolio.
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