Bank of Scotland and Glitnir are delaying completion of the syndication of the £400m debt package backing Baugur’s acquisition of UK department store chain House of Fraser until early next year. Completion of syndication was due at the end of October.
The news came as the takeover of the retailer by the Highland Acquisitions vehicle was completed and House of Fraser left the stock market.
Some investors are shying away from committing to the funding deal before Christmas trading figures are available. Almost 70% of House of Fraser’s annual earnings come from the traditional consumer spending spree in November and December and as such these results are the primary performance indicator.
Despite obvious faltering on the part of investors the bookrunners are keen to point out that this was an expected development, that a “substantial number” of investors have already committed, and that this delay is in no way reflective of the credit quality of House of Fraser or its new management team.
“This is a very good quality credit and a strong business,” says Mark Elliott at Bank of Scotland. “We always we knew we would be taking two bites at this syndication. This is a retail business and some investors naturally want to know the outcome of Christmas trading before confirming their uptake. We are pleased that a substantial number of commitments have already been received from banks and institutional investors. A good number of other investors have also expressed an interest in reviewing the transaction again in Q1 2007 once the Christmas trading results have been confirmed.”
The deal is reportedly under no time pressure and will therefore wait to be completed early next year.
At the same time Highland has appointed current Matalan chief executive John King to the same post at House of Fraser. Discount retailer Matalan is currently the subject of its own £817m management buy-out led by founder and chairman John Hargreaves. King had already resigned from Matalan and was due to leave by the end of the year. Highland said King would join in early 2007. Incumbent House of Fraser chief executive John Coleman has resigned with immediate effect.