House of Fraser owed £484m before collapse


House of Fraser owed £484m to its creditors including designers like Gucci, Armani and Diesel before its collapse.

The chain was bought out by Mike Ashley’s Sports Direct last week, but the retail tycoon says he will not pay suppliers any money owed before his takeover.

HoF’s administrators Ernst & Young (EY) have reported the chain’s creditors are owed millions, with companies like Versace, Gucci and Prada among the biggest names out of pocket.

EY says the unsecured creditors are owed £484m, but this figure could rise if more of them send in claims.

HoF has already been forced to cancel all its online orders after a dispute with its third-party logistics company, XPO, which it owes £30m.

The EY report shows HoF was knocked by a 7.7% decline in sales in the first 13 weeks of the year, with gross profit falling by £14.6m.

EY notes HoF tried to address the problems, even securing a £50m injection of capital in March.

But the report states: “These actions were unable to address the downturn in trading performance and the directors concluded that the business had reached a stage where it was no longer able to continue to meet its ongoing costs in its current format.”

Mr Ashley bought HoF for £90m in a “pre-packaged administration”, which means he can drop certain liabilities through the insolvency process.

HoF also owes the Royal Mail £135,465.

The company apologised to customers and is issuing refunds to those awaiting online orders, after XPO told employees to stop accepting orders from the department store.

Mike Ashley has had a long-standing desire to move his retail empire upmarket
Image: Mike Ashley bought the chain when it collapsed

HoF has told suppliers they will not be paid for orders dispatched before 10 August.

Jigsaw, which was owed more than £440,000, has told Sky News it pulled its brand from more than 20 stores last weekend.

According to Sky sources, brands that are owed millions of pounds are considering leaving the chain.

They also called into question Mr Ashley’s ambition to turn HoF into the “Harrods of the high street”.

“Some of the biggest brands are in a ‘Mexican standoff’ with Mike Ashley over debt, sources said.

“They are owed a great deal of money and are threatening to leave stores unless he pays a significant portion of it over the next few days.

“They are arguing that the new owner will not be able to build the ‘Harrods of the high street’ without them but there is a concern about the unpredictable businessman’s handling of this.

“Does he truly want luxury brands in his stores or is he planning to let them go and do something else?”

Most of the £90m Mr Ashley paid for the store will be used by the administrator to pay banks and bondholders.

There will be very little left for suppliers, like Tommy Hilfiger, Topshop and Mango.

More from Mike Ashley

A message posted on the HoF’s website said: “We’re working hard to makes some improvements to the website.

“Don’t worry, we will be back up and running as soon as possible.”

From – SkyNews


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