House of Fraser calls in EY as administrators

House
of Fraser.

House
of Fraser

• The 169-year-old UK department store House of Fraser
  has fallen into administration after failing to secure a rescue
  deal.
• The Chinese-owned company has struggled with falling
  sales in recent years and now has debts larger than its
  assets.
• Accountants EY has been appointed to find a buyer for a
  business. Sports Direct billionaire Mike Ashley is said to be a
  front-runner.
• House of Fraser employs 17,500 people across the UK.
  Even if a buyer is found, some of these jobs could be at
  risk.

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LONDON — Beleaguered UK department store House of Fraser on
Friday called in administrators after failing in its attempts to
negotiate a rescue package or sale of the business.

House of Fraser said in a statement on Friday that talks with
investors and creditors had “not concluded in a solvent
solution.”

EY, one of the “Big Four” accountants, have been appointed as
administrators. House of Fraser, which employs 17,500 people
across nationwide, will continue to trade while EY tries to find
a buyer for part or all of the business.

Companies fall into administration in the UK when they become
insolvent, with debts larger its assets. Administrators are
appointed to take control of the business and act in the best
interest of creditors, realizing value by selling the business
part or whole.
Sky News reports that Sports Direct billionaire Mike Ashley is an
early front-runner to buy the business.

House of Fraser said in its statement: “Significant progress has
been made towards completing a sale of the Group’s business and
assets. The proposed administrators are expected to continue to
progress those discussions with a view to concluding a
transaction shortly after their appointment.”

If a buyer cannot be found, EY will likely shutter the company
and liquidate its assets. Even if a buyer can be found, jobs may
be lost in the process.

Mike
Ashley is reportedly an early front-runner to buy House of
Fraser.
Getty

Richard Hyman, an independent retail analyst, told Business
Insider: “Whatever happens, you can see that House of Fraser’s
staff are the last to be informed and this morning, don’t
really know what their future is. It’s a very shabby way to treat
people and bad news for the wider economy.”

House of Fraser, which was founded in 1849 in Glasgow, has

been at risk of toppling for several months. The department
store’s Chinese owners tried to seal a rescue deal earlier this
month that collapsed, leaving House of Fraser in a precarious
position. The company also faced an extended battle with
landlords to try and reduce its rents and buy more time.

House of Fraser was acquired by Chinese group Sanpower for £450
million in 2014, but the chain has struggled since then. House of
Fraser lost £9 million last year and sales over the crucial
Christmas period fell by 2.9%. The company has a £400 million
debt pile.

Mark Williams, the president of retail property organisation
Revo, said in a statement earlier this week: “House of Fraser is
a business that has been under-invested in for many years and
that’s the ultimate reason for its failure.”

The collapse of House of Fraser follows the demise of fellow
department store BHS in 2016. The UK is facing an extended slump
in retail sales this year and department stores have been
particularly badly hit. Debenhams, another UK department store,

announced an 85% collapse in profits in April.

Frank Slevin, chairman of House of Fraser, said in a statement:
“This has been an extraordinarily challenging six months in which
the business has delivered so many critical elements of the
turnaround plan. Despite the very recent termination of the
transaction between Cenbest and C.Banner [the collapsed rescue
plan], I am confident House of Fraser is close to securing its
future.”

Hyman said: “There will be more retail casualties — we are only
really in the early stages of a huge shake out.”