The future of one of Scotlands oldest retails Jenners hangs in the balance as administrators have been primed to plunge House of Fraser, including the Edinburgh flagship, into administration as early as Monday after the ailing retailer hit further crisis.
A cash injection of £70 million, seen as the high street retailer’s last chance of survival, failed to materialise after a deal with Hamley’s Chinese owners C.banner fell through.
Accounting firm Ernst and Young (EY) have now been put on the alert to make preparations to put the chain into administration.
EY drew up back-up plans as a part of the Company Voluntary Arrangement (CVA) to shut 31 of its 59 stores, approved by creditors in June, and sources told The Telegraph said that preparations were currently underway to put the retailer into administration should it come to that.
The department store chain launched a store closure programme to be delivered through a the CVA backed by creditors. The closures required approval from House of Fraser’s landlords who challenged the CVA in what is believed to be the first legal challenge of its kind in Scotland.
They filed a petition in the courts on the grounds of alleged unfair prejudice against certain creditors as well as material irregularities in the implementation of the CVA.
The landlords, who filed a complaint via the Court of Session in Edinburgh on Friday, said that they were “unfairly prejudiced” during the CVA insolvency process known that was approved by a majority of creditors, including landlords, last month.
A court date has now been set for August 14.
The group, who are being advised by accountancy firm Begbies Traynor and property advisory firm JLL, also allege there were “material irregularities in the implementation of the House of Fraser CVA”.
The statement from the landlord group said it was “unjust” that House of Fraser’s majority shareholder, Nanjing Cenbest, which is part of China’s Sanpower conglomerate, was set to receive £70m for some of its shares in the ailing department store from the then new investor, C.banner, as part of a wider rescue deal while landlords creditors take a financial hit.
Hopes for a last-minute rescue for House of Fraser have so far hinged on talks with media mogul Philip Day, who controls Edinburgh Woollen Mill and Peacocks as well as a £50 million loan from Mike Ashley, founder and chief executive of Sports Direct.
But retail expert Richard Hyman said talks of “rescue” deals can be misleading and any hopes of saving the business at this stage fail to take into account the reality of the financial situation. Mr Day has earned a reputation for buying up distressed chains.
He said the options available are likely to be “various shades of grim”.
He added: “The bottom line is – can anyone generate around double the business the current leadership team has managed without throwing money at it? The answer is no, I’m afraid. Anyone saving the business would need a return on their investment. I can’t see how that could be achieved.”