House of Fraser appoints Rothschild for debt refinancing

In December rating agency Moody's downgraded House of Fraser's credit rating - PA

House of Fraser has appointed Rothschild to advise it as it prepares to refinance its debt package, less than a month after its Chinese owner took the unusual step of reasserting his support for the struggling department store chain.

The UK retailer, owned by China’s Sanpower, has brought in the boutique investment bank to advise on the refinancing of £225m of its £390m debt package, maturing in July 2019. Its remaining £165m publicly traded bond matures in 2020.

The move comes amid growing concerns about the health of the business and a slump in festive trading.

In December rating agency Moody's downgraded House of Fraser's credit rating to Caa1 from B3 and kept a negative rating on its £165m of bonds.

It said that the downgrade reflected House of Fraser's weak trading in the first three quarters of 2017, particularly after the launch of a new web platform and underperformance its own brands.

David Beadle of Moody’s said at the time that the downgrade was necessary due to the “negative trajectory of profitability and resultant deterioration in already weak credit metrics”.

The department store suffered a 4pc slide in total sales over the six weeks to December 23 after deciding to protect profit margins by reducing its level of internet discounting, it said in a trading update in January.

For the first time since he bought an 89pc stake in the business in 2014, Yuan Yafei, chairman of Sanpower, gave his own commentary in the update, saying that he "remains confident" in House of Fraser's prospects as it embarked on its turnaround plan. 

In September Sanpower pumped £15m into the business, its first cash injection since buying the chain three years ago, as losses widened to almost £9m.

Colin Elliot, House of Fraser's finance boss, said previously that the cash had provided additional headroom and also demonstrated its owner was supportive, "contrary to some speculation".

House of Fraser's publicly traded bond has tumbled 6.63pc or 5.41p to 76.08p in the pound over the past month.

Rothschild declined to comment.