Aggressive American hedge funds have been buying up bonds in House of Fraser, which have fallen in value in recent weeks due to concerns over the performance of the retail market.
According to The Times Apollo Global Management is one of the funds that has been buying the bonds, which closed trading at 85p last week. The bonds were bought by Apollo’s trading desk which buys and sells bonds for profits as opposed to its private equity arm which attempts to take control of distressed companies.
Last year the British-based, Chinese-owned department store group issued £175m worth of bonds on the Luxembourg Stock Exchange as part of a £300m refinancing. The bonds have since dropped in value given concerns about the outlook for retail, in particular since the Brexit vote in June.
Last month House of Fraser posted flat interim sales of £573.5m in the six months to 30 July 2016 but warned that trading had been challenging and in the ensuing eight weeks until 24 September sales had dropped 2%.
House of Fraser is controlled by China’s Sanpower group and CEO Nigel Oddy has said that despite the challenges of the market he was “cautiously optimistic” for the forthcoming festive season trading during which the business typically generates 80% of its earnings.
The group operates around 60 stores and has been undergoing a period of store refurbishment with some significant openings too. By the end of this year it will have opened its first store in China, in Nanjing, while a further store at Rushden Lakes shopping centre development in Northamptonshire is due to open in the summer of 2017.
It has recently been upping its credentials in the fashion and beauty stakes with the introduction of new brands to the group including Charlotte Tilbury, AllSaints, Monsoon and Mulberry.