Mike Ashley told to pay House of Fraser suppliers in full

Business
House of FraserImage copyright Getty Images

Mike Ashley’s Sports Direct is facing calls to boost payments to out-of-pocket House of Fraser suppliers.

Sports Direct bought the 59-store department store chain on Friday for £90m, just hours after it went into administration.

Some suppliers expect to be paid almost nothing for what they are owed.

But Philip Day, who also wanted to buy House of Fraser, said Mr Ashley should pay suppliers – who are said to be owed £70m – “in full”.

A spokesperson for Sports Direct repeated a statement issued on Friday which said it aimed to “restore the right level of ongoing relationships with the luxury brands”.

House of Fraser has both wholesale suppliers, which get paid after their goods are delivered, as well as concession holders that are paid only after items are bought by customers.

Mr Day’s comments, first reported by the Times, call on Mr Ashley to “do the honourable thing” and pay suppliers, which are due to be paid on 20 August.

“Mr Ashley has said that relationships with brands and partners are vital to the future of House of Fraser, and ensuring that bills are settled with concessionaires will be critical to maintaining those relationships,” Mr Day’s spokesperson told the BBC.

“The concessionaries have helped keep House of Fraser trading over the last year and the industry is now looking to Mr Ashley to do the right thing”.

Richard Hyman, an independent retail analyst, expected the Sports Direct owner to hold talks with suppliers, he told BBC Radio 4’s Today Programme.

Mr Ashley “needs to get those concessions and suppliers on side because otherwise, without them, the stores will be half empty”, Mr Hyman said.

‘Proper safeguards’

Issues have also been raised about the House of Fraser pension fund, which the Pensions Regulator said it was monitoring.

Because House of Fraser went into administration it falls under the auspices of the Pension Protection Fund, which protects the payments to existing pensioners and cuts the pension pots of those yet to retire by 10%.

Sir Vince Cable, the Liberal Democrat leader and former business secretary, said administrators should be made to reports on large deals like the House of Fraser to MPs.

“Pre-packs are controversial. In principle it’s a good idea – it prevents companies being broken up and prevents what happened with Comet, Woolworths, BHS,” he told Today.

“The danger is that the agreement which is reached is unfair to one or other parties. It could be the unsecured creditors, like the suppliers, or it could be the taxman or in this particular case there are worries that it’s unfair to the pensioners.”

Sir Vince said he did not want to destroy the model, but proper safeguards were needed: “A regular and definite reporting system, and a public transparent system of reporting to a parliamentary select committee for the largest, would be the way forward”.

A spokesperson for the Insolvency Service said: “The government is continuing to assess the impact of the industry-led measures introduced in 2015 to make pre-pack insolvencies more transparent and these findings will help the government assess if further action is needed.”

https://www.bbc.co.uk/news/business-45168647

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