Main Index

Index to British press articles on the Fayeds' purchase of Harrods

After rumours that Mohamed Al Fayed could be in the running to buy Texaco's German interests, financial expert Lorana Sullivan sifts House of Fraser's accounts and reveals the increasing, massive losses incurred as a consequence of borrowings approaching £1 billion -- nearly £400 million more than the Fayed brothers had paid for the Harrods stores group only three years earlier.

The Observer 
Sunday, 1 May 1988

JUDGING from the performance of Harrods and House of Fraser and their US interests, it is difficult to see where the Fayed brothers -- Mohamed, Ali and Salah -- would find $1.3 billion in cash to buy Texaco's West German interests, writes Lorana Sullivan. 
    Take House of Fraser Holdings plc, the master UK company for the stores group.  It reported a pre-tax loss of £35.3 million for the year to 2 May 1987, after interest charges of £52 million.  A tax credit of  £16.7 million reduced the loss to £18.6 million.  As a result of this and previous losses, largely due to interest costs, the company carried forward losses of £40.8 million into the current financial year. 
    Despite the losses, HoF Holdings repaid £23.5 million to Al Fayed Investment & Trust SA of Liechtenstein, the group's ultimate holding company. 
     HoF Holdings finally lodged its 1987 annual report and accounts at Companies House on 24 March -- some 22 days after the filing deadline, which had already been extended at the company's request.  Yet the directors and auditors had signed off the accounts on 19 August last year. 
    Consolidated net borrowings of the House of Fraser group rose to £934.7 million at 2 May 1987, compared with £827.7 million in 1986.  At the same time the group's consolidated interest costs climbed to £83.3 million last year from £77.6 million in 1986.
    As a result, the consolidated pre-tax loss was £10.4 million in 1987, against £6.1 million in 1986. 
    Given the costs of its borrowings, it is not surprising that the company embarked on a rationalisation programme last autumn, selling several of its UK stores as well as Illum of Copenhagen, its Danish showpiece.
    Other parts of the Fayeds' visible empire also appear less than profitable.  The Ritz Hotel in Paris, and English-registered company, reported a 1986 loss of £14 million.

Previous article

Next article