The Chinese company behind House of Fraser will inject about £15m into the department store chain this week as part of a plan to allay concerns about the 169-year-old firm’s financial health.
The retailer, which employs 6,000, has been under the spotlight over fears it could become the next victim of torrid trading conditions for the UK retail sector that have already claimed well-known high street names such as Toys R Us and Maplin this year.
It is trying to slash the floorspace of its 59-strong store chain by 30% and reduce its rent bill after dismal Christmas trading figures, while its bank lenders have hired accountancy EY to review the firm’s finances. The chain has also held talks with Alteri – a turnaround firm that specialises in struggling retailers – fuelling speculation that is looking to refinance its £400m debts.
House of Fraser has since protested that it only agreed to a meeting at Alteri’s request and could not have sought fresh finance in any case, given the terms of its existing loans.
The picture has been further complicated by suggestions that China’s Sanpower, which owns 89% of the company, is seeking to offload the majority of its stake to fellow Chinese leisure firm Wuji Wenhua.
But the Guardian understands that Sanpower, which bought House of Fraser in 2014 in a deal worth £450m, will reaffirm its commitment to the business, starting with an expected £15m cash injection as soon as this week.
The Sanpower chairman, Yuan Yafei, reassured the trade minister, Liam Fox, that he wants to own House of Fraser for the long term, in a discussion last Friday at Hong Kong’s Great Festival of Innovation.
The entrepreneur, who started his business in 1993 with $2,000 (£1,415) and is now worth an estimated $12bn, is thought to have promised further investment, coupled with a wider overhaul and modernisation of the company and House of Fraser brand.
A spokesperson for Sanpower confirmed that Yafei will inject more money into House of Fraser via Nanjing Cenbest, Sanpower’s Shanghai-listed subsidiary.
“We at Sanpower continue to support House of Fraser as it embarks on a year of significant transformation in 2018,” he said. “Sanpower, through the listed company, has invested £45m in House of Fraser and plans to inject further capital.”
With the money on its way, the chief executive, Alex Williamson, wrote to House of Fraser’s suppliers on Monday to say that the company was continuing with business as usual.
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