C.banner International has dropped its House of Fraser rescue plan, dealing what some observers in the UK are describing as a potentially fatal blow.
Hong Kong-listed C.banner, which is the parent of toy retailer Hamleys, had undertaken to invest £150 million into House of Fraser assuming control of the business.
In June, the deal appeared to be confirmed after creditors of House of Fraser agreed to a Company Voluntary Agreement in which 31 stores would close in the UK and Ireland and 6000 jobs cut. After the downsizing, House of Fraser would have just 28 stores in the UK and Ireland. Creditor approval of the CVA was a pre-condition of C.banner’s investment.
However in a statement issued to the Hong Kong stock exchange, C.banner has backed out.
“In view of the fact that the recent market prices of the shares as quoted on the stock exchange have significantly dropped to a level which is far below the placing price range of HK$2.40 to $3.00 per placing share, the company and the placing agent are of the opinion that the placing has been rendered impracticable and inadvisable, and therefore no longer intend to proceed with the placing.”
C.banner’s share price has fallen to $0.71 since June 1, when it announced the plan.
Furthermore, C.banner has issued a profit warning, predicting a loss of RMB20 million in the six months to June, compared with a RMB39 million profit for the same period last year.
Talks with new suitors
Meanwhile, House of Fraser is now in negotiations with other parties, including Mike Ashley, the owner of Sports Direct, over a rescue bail-out – it needs £50 million rapidly to avoid collapse.
The Guardian newspaper has reported the department store group is struggling to pay a quarterly rent bull of nearly £25 million due in late September and to fund the purchase of millions of pounds of stock for the peak Christmas trading period.
And, subsequent to creditor approval of the CVA, some of the company’s landlords have launched a legal challenge against the planned store closures and rent reductions. While all creditors had a vote on adopting the CVA, it only required a majority of 75 per cent to be carried. The landlords were on the losing side of that vote.