Beatties fears grow as other House of Fraser stores saved
Tracksuit billionaire Mike Ashley and his property team have sealed deals to save a string of once-doomed House of Fraser stores, but the fate of Wolverhampton’s Beatties store still hangs on a knife-edge.
Talks with the owners of the Beatties site are continuing, but Mr Ashley’s Sports Direct business, which bought the ailing department store group out of administration for £90 million, has warned it will have to announce some store closures tomorrow.
Stores in Middlesbrough, Darlington and Carlisle were all yesterday given a reprieve.
Along with the shop at Telford, they had been set for closure under the failed rescue deal drawn up by the previous owners. Instead they are now to stay open.
James Keany, head of national agency at property agents CBRE, which has been handling talks with landlords for Mr Ashley, said: “The team have been working round the clock and over the bank holiday weekend to secure as many deals as possible safeguarding stores and jobs for local communities.”
Mr Ashley has said he wants to retain around 47 of House of Fraser’s 59 stores.
The Sports Direct tycoon, who also owns Newcastle United, has also struck a deal to save the flagship store in Oxford Street, which had also been set for closure.
Mr Ashley said: “It is a massive step forward and further enhances our strategy of elevation across the group.
“We will do our best to keep as many stores open as possible.”
Mr Ashley’s declared approach would see around 80 per cent of House of Fraser’s stores remaining open – instead of the previous plan to close more than half.
That was under a rescue plan called a CVA, or company voluntary arrangement, drawn up by House of Fraser’s management and the previous owner – Chinese group Sanpower – 31 of the 59 stores would have closed, including Beatties, the store in Birmingham and both Shropshire outlets in Shrewsbury and Telford.
Landlords were furious, saying they were bearing the brunt of House of Fraser’s bailout. The CVA deal passed a bitterly contested vote of bondholders and creditors, but then another Chinese group that had promised to pump fresh cash into the company pulled out, leading to the collapse of the company into administration.
- Express & Star comment: Future of Beatties in the balance
Mr Ashley stepped in to buy the business and declared his aim to keep most stores open, possibly by using the sites to house outlets of Sports Direct and his Flannels luxury brand chain. But many landlords are still unhappy at the terms he is offering them.
Only a handful are being offered the same level of rent that was being paid for stores before House of Fraser’s fall into administration. Most of the rest have been offered rents linked to an outlet’s turnover.
But some landlords have been offered deals in which they would receive no rent, but will be paid a service charge and get their business rates covered.
Under the terms of the administration, Mr Ashley should be able to start his ownership of the business with a clean slate, but the size of the bills owed to landlords and fashion chain suppliers means they want to strike compromise deals that will see them recover some of their money.
House of Fraser had debts of close to £1 billion when it collapsed, with more than half the money owed to suppliers such as Polo Ralph Lauren, handbag maker Mulberry, upmarket footwear retailer Kurt Geiger and fashion brand Phase Eight.
One of the biggest single trade creditors was distribution firm XPO Logistics, which suspended deliveries to House of Fraser stores over the £30m it was owed.
It has now restarted deliveries after crisis talks with Mr Ashley’s team.
More than 1,000 suppliers to House of Fraser – including Tommy Hilfiger, Barbour and even the Pretty Green fashion label launched by former Oasis frontman Liam Gallagher – are unlikely to receive any money from the company’s administrator, accountancy EY. Sports Direct is in talks with them but is understood to have only promised to cover money owed since Mr Ashley bought the business.
The £90 million Sports Direct paid for House of Fraser went towards paying off its banks and bondholders, who were owed a total of around £400 million.
The recent collapse in the value of the business is underlined by the fact that Mr Ashley was able to snap it up for £90m after its former Chinese owners Sanpower paid £450m in 2014.