'Vultures are circling' over Beatties and House of Fraser ahead of crunch vote
As the future of Beatties owner House of Fraser hangs in the balance, depending on a make-or-break vote tomorrow, "vultures are circling" says a university business expert.
The ailing department store chain needs its creditors and landlords to back a rescue plan called a Company Voluntary Arrangement which would see half its branches closed, rent cuts on others, in the hope of salvaging the rest of the business. If the vote fails, House of Fraser will go into administration and, instead of Beatties and 30 other stores closing in early 2019, shops could be shutting in days or weeks.
Professor Mike Haynes, from the University of Wolverhampton, said: "Vultures are circling over the bleeding body of the House of Fraser.
"Whatever happens tomorrow, Beatties and 30 other stores will close. The issue is whether House of Fraser's creditors will accept reduced rents on the rest.
"Things are made more complicated by the fact that two House of Fraser companies are involved.
"If the larger company that controls most of the stores is saved, this will allow a period for restructuring. There will be a more gradual winding down of Beatties and the other closing stores.
"But if the creditors pull the plug then the likelihood is that the company will go under. House of Fraser will not be able to pay its bills. Like Carillion, people will grab what they can and get out quick."
Many of House of Fraser's landlords are unhappy about the rescue deal. Prof Haynes said: "If a company goes under landlords lose their tenants. Even if you successfully re-let you might have to accept a lower rent and a shorter lease as well as offer sweeteners to potential new retailers. Big units are some of the hardest to move. The still boarded up British Home Store shops show the problems in the retail sector.
Property companies, he said, "complain that if they are pressured to do a deal for House of Fraser then they can be asked to do a deal for others, including shops which are doing better."
Prof Haynes added: "There are also those who are willing House of Fraser to collapse. When a big company goes down there are always a few who will win. The big vultures will try to pick off the juicy pieces without having to worry about pensions, redundancy payments and so on.
"The Chinese company C.banner looked a saviour a few weeks ago but little is known about how it really works. Its takeover of Hamley's in 2015 was clearly a clever prestige buy. Will it still view House of Fraser in the same way tomorrow? It may. We should not underestimate how savvy its management might be – preferring a few morsels at a give-away price.
"And there are stories that others are circling to feed on the carcass.
"Either way insolvency experts, accountants and lawyers will pick up business. Stock will be sold off to knockdown specialists. It will reappear in discount stores and on markets. Even the fittings will have value. And whenever the boards go up on Beatties' windows and doors someone will be paid to do the work."
