House of Fraser Pre-Pack – More Details Disclosed

The Financial Times disclosed more details of the pre-pack administration of House of Fraser this morning which I previously commented on here: https://roliscon.blog/2018/08/12/house-of-fraser-pre-pack-is-it-such-a-great-deal/

The FT makes it clear that there was at least one other serious bidder for the company who was willing to purchase the business as a “going concern”. That bidder was Philip Day. How much he was willing to pay is not totally clear, but EY, the administrators are quoted as saying “For the avoidance of doubt, this was the only available offer to save the business, and in comparison to the alternatives represented by far the best recovery for the creditors of House of Fraser”.

The first part of that statement conflicts directly with the other information obtained by the FT. My conclusion is simply that the administrators preferred one bidder rather than another, probably at the behest of the secured lenders (i.e. the banks). There can be a number of reasons for doing so but in essence it’s very typical of what happens with pre-packs where the rush to complete the deal prejudices obtaining the best outcome other than for the secured creditors. So stuff the pensioners, stuff the trade creditors who have supplied goods they won’t now be paid for, stuff the property owners and stuff everyone else so long as the banks get paid.

The administrators can always claim in such circumstances that other offers were not available because very few bidders are likely to make an offer without some information about the business they may be buying and they may need time to put in place the funding required. At least some minimal due diligence is essential. But the administrator can delay or hold back information to thwart other bidders than their favourite candidate. So they can claim that there was only one firm offer on the table when the business was placed into administration.

This is a corruption of the administration process when there should be open marketing and time allowed for reasonable offers to be made so as to obtain the best solution for all stakeholders.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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