The chairman of UK department store chain House of Fraser has stressed its resilience to difficulties facing part-owner Baugur Group after the Icelandic banking collapse.

House of Fraser chairman Don McCarthy has today (13 October) stated that its funding is supplied through a group of international banks, lead by HBOS, and that it has repaid or cancelled over GBP110m of debt.

He said: "As the economic crisis in Iceland deepens, the speculation continues to rise on the likely impact on Baugur and its future. From time to time this speculation has enveloped House of Fraser.

"I felt that it was again important to clarify the independence of House of Fraser from these issues and to emphasise that they have no impact on the strength of its business, its operations or its trading performance."

"There is no doubt that Baugur is facing a difficult period, as they have been unwillingly drawn into the Icelandic banking crisis and the unfortunate political repercussions between the Icelandic and UK Governments.

"While we remain positive that the situation will be resolved, it is important to understand our distance from these events. House of Fraser is very confident of its broad and supportive shareholder structure and also of its debt position."

His comments follow today's reports that Icelandic investment firm Baugur has called in retail entrepreneur Sir Philip Green for talks about a possible investment in its UK businesses.

It comes a week after three of Iceland's top banks were nationalised amid the global financial market turmoil.

The Baugur-led Highland Consortium acquired House of Fraser in August 2006 for GBP351.4m (US$664.14m). Other investors making up Highland included McCarthy, FL Group, TBH Trading, Kevin Stanford, Bank of Scotland  and Stefan Cassar.

Baugur's other UK investments include fashion chains Whistles, Jane Norman and Mosaic Fashions - including the Oasis, Warehouse and Karen Millen retail brands. It also has stakes in Debenhams, Moss Bros and French Connection.

"I hope that the Icelandic situation can be resolved quickly. In periods of economic change that everyone is facing at the moment, any lack of clarity and dangerous talk can only cause concern amongst the vast number of people employed in the retail industry.

"To our employees and partners, I want to assure you of the strength of our management team, the strategy we have established and our confidence in delivering continued development through this tough period," added McCarthy.

By Joe Ayling, news editor.