Debate Magazine

Glorious Bit of Landlord Squealing

Posted on the 22 June 2018 by Markwadsworth @Mark_Wadsworth

From the BBC, a few highlights:
Six thousand jobs are at risk in a drastic attempt to save [House of Fraser] from collapse. If the rescue plan fails, administration is likely. But High Street landlords are furious about the way they're being treated. They are the creditors who have to shoulder the burden of financial losses.
Many properties are owned by institutional investors who rely on store leases to provide a steady income stream for pension funds and insurers. Take the House of Fraser store in Milton Keynes. It's part of a shopping center co-owned by Hermes Investment Management. Its rent generates long-term funding for two big pension schemes.
"Landlords are in an invidious position. We enter into these long-term contracts in good faith, with pensioners' income and security often at stake," says Chris Taylor, head of private markets at Hermes Investment Management.
House of Fraser is using what's called a company voluntary arrangement (CVA), a form of insolvency proceedings, to overhaul its business...
The plan requires approval from 75% of its unsecured creditors. All creditors get a vote, but the value of the vote depends on how much they are owed.
Under insolvency rules, landlords' claims are already heavily discounted because of how accountants judge their losses. The issue for landlords is that their "say" or voting rights in the CVA process is discounted by a further 75%, which they believe is grossly unfair.
The BBC understands that even if most landlords vote against the plan, they won't have enough clout to win the day.
"With landlords' voting power reduced by 75% of the value of their claims, the dice are clearly loaded against them in the CVA process," says Mark Fry, from the restructuring firm Begbies Traynor... "Even if the majority of landlords were to vote against the CVA, that would not be enough to stop it being approved in its current form, leaving landlords taking all the pain of the CVA process whilst House of Fraser's shareholder takes out £70m."

I'd never heard of that reduced-votes-for-landlords rule, but it sounds eminently sensible to me.


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