Selfridges asks holding company for cash to meet debt obligations

Cambridge Properties Holding, the company formed in late 2021 for the Selfridges takeover and jointly owned by Thailand’s Central Group and Austria’s Signa, has filed its annual accounts in the UK. And it has been revealed that Selfridges has asked it for cash in order to meet its debt obligations.

The filing came almost at the same time as Signa-controlled real estate business Signa Prime Selection filed for insolvency. Prime co-owns valuable retail properties such as the Selfridges department store in London and Berlin department store KaDeWe and the latest insolvency move follows the collapse of the wider Signa real estate business in recent weeks.

Back to those Cambridge Properties results, it seems that in 2022, revenue was £49 million but group profit before tax was £264.1 million and EBITDA added up to £329.2 million. As of the end of the year, the entity had net assets of £834.1 million.

But the most interesting aspect of the report was around the debts that the company has. It has two external loans falling due in the near future and those loans have been financed at relatively high interest rates due to rising rates in recent years.

Under the base case scenario prepared by the firm’s auditors, additional funding will be required from the ultimate controlling parties to service the interest on both of the loans and ensure compliance with the interest cover covenant attached to the one held by London Oxford Street Limited. That loan is due for repayment next August unless extended by 12 months, the extension being dependent on continued support from the controlling parties. 

Interest payments that were due in November in respect of the aforementioned loan and another related to Manchester Exchange Square Invest Limited were funded by a shareholder loan note of £27.3 million. This note is due for repayment next May. 

The company said that given the events that have taken place in respect of Signa Holding GmbH, the directors are in ongoing discussions with the other joint shareholder “regarding the source, structure and form of future financing to be provided to the group”.

But while the accounts also included the caveat that discussions aren’t yet finalised and there’s significant uncertainty around the financial support the group will require, nobody is actually expecting any bad news around Selfridges. The company remains one of the world’s top department store businesses and a major retailer for the luxury sector, with strong prospects.

Central Group has already confirmed its commitment to the business and a Selfridges spokesperson was quoted as saying: “This does not change anything for Selfridges. Selfridges trades independently from its shareholders. We are delighted to have the ongoing and unwavering support of Central Group.”

The Thai department stores conglomerate had previously converted a similar shareholder loan that was made to the operating side of the Selfridges business (rather than the real estate side) into equity, which led to it having majority control as of last month. It had owned 50% when the business was originally taken over by it and Signa for a price reported to be around £4 billion.

But regardless of Central’s support and commitment, the situation does highlight the issues faced by companies at the moment that have taken out loans and are facing high interest payments to service them.