House of Fraser has held emergency funding talks with specialist lenders amid mounting fears for its future as retailers battle increasingly torrid trading conditions on the high street.
Executives at the department store chain, which dates back to 1849, are believed to have met with Alteri, a London-based turnaround investor that focuses on struggling European retailers.
House of Fraser, which was bought by the Chinese conglomerate Sanpower in 2014, suffered a tough Christmas with store sales down 2.9% and online sales tumbling 7.5% compared with the previous year. The company, which has 59 stores and 17,500 staff, is already trying to cut its high street footprint by 30%.
It is said to be looking for about £40m of fresh funding from Alteri, according to the Sunday Times. Alteri is backed by the US hedge fund Apollo Global Management.
A House of Fraser spokesperson said: “As you’d expect in the current market, [finance] providers are keen to talk to retailers.” However, they added that the terms of the company’s existing banking arrangements meant it was unable to borrow from secured lenders.
House of Fraser is the latest in a string of British retailers to seek fresh funds, restructurings or collapse into administration. Toys R Us, Maplin and bed specialists Warren Evans and Feather & Black have all collapsed recently.
House of Fraser’s existing lenders are believed to have hired the accountancy firm EY to advise them on the firm’s future and the chances of them recouping their loans. The syndicate of banks lending to House of Fraser, understood to include HSBC and the Industrial and Commercial Bank of China, turned to EY for help last week, according to Sky News.
The retailer, which directly employs 6,000 staff and hosts another 11,500 concession workers, is believed to have about £400m of borrowings from banks and bond investors.
The sudden drop in the value of the pound after the Brexit vote pushed up the cost of importing food and fuel to Britain, causing inflation to rise and putting intense pressure on household finances already constrained by weak wage growth.
The latest twist for House of Fraser came after Sanpower sold a 51% controlling stake to Wuji Wenhua, a little-known Chinese leisure group.
Sales in stores for the six-week period from the beginning of Black Friday in late November to 23 December declined by 2.9%, while online sales fell 7.5% over the period.
In December, the credit ratings agency Moody’s downgraded House of Fraser’s debt to junk status as weak trading and disruption caused by the launch of the company’s new website was compounded by poor sales of its own-label ranges.
House of Fraser is due to announce its full-year results in mid-April, when it will also provide an update on a transformation plan to find £26m of savings per year. About £10m per year has already been saved, and the firm has said it made progress towards finding the remaining £16m of savings in 2018.