Mothercare plan after CVA approved
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Mothercare is set to raise £32.5 million from its existing shareholders as part of a restructuring plan to secure its long-term future.
The embattled retailer of baby and childrens goods has set July 27 as a deadline for raising the additional capital. Conditional on the share issue being fully subscribed, the company’s existing lenders have agreed to a revised debt facility of £67.5 million.
A Company Voluntary Agreement (CVA) for the restructure of the business was largely approved, the exception being a plan to save Childrens World. In a statement, the company said it received insufficient support from creditors for the CWL plan, and as a result that business has been placed into administration, with 13 of its 22 stores to be transferred to other Mothercare group companies to continue trading.
Combining the exit of CWL and other aspects of the Mothercare CVA, the company will close 60 UK stores, leaving it with just 77 by June next year. Of those, 19 will be on reduced rent.
Clive Whiley, interim executive chairman, said when he joined the business just three months ago, Mothercare faced “a bleak future with growing and pressing financial stresses”.
“We have worked tirelessly as a team to get to where we are today and this fully underwritten equity issue marks the end of this initial phase, returning the group to financial stability. This could not have happened without the support of all of our stakeholders for which we are very grateful.”
He said that while the lack of full approval for the Childrens World CVA was disappointing, the company has found a solution which allows it to go “further and faster” with the right-sizing of its store portfolio.
“We have also identified significant areas for further efficiencies and cost savings, which will underpin our return to a sustainable future.”
“a bleak future with growing and pressing financial stresses”
The company said current trading continues to follow the patterns seen in the second half of the last financial year, with challenging conditions in the UK balanced by “some stability” in its international operations
The group has identified cost savings totalling £19 million together with £10 million cash realisation arising out of the CVA plan and other initiatives.
CEO Mark Newton-Jones said the group has gone through an “unprecedented period for UK retail”.
“We have not been alone in facing a number of strong headwinds. However, we are now in a position to re-focus on our customers and improve the Mothercare brand both in the UK and across the globe. We have exciting plans ahead to revitalise the brand through enhancing our product ranges, improving our design and value, developing our digital and multi-channel proposition and investing in our people.
“Our goal remains clear, to be the leading global specialist for parents and young children,” he concluded.
Questions & Answers
Q.How much new capital is Mothercare aiming to raise from its shareholders?
How much new capital is Mothercare aiming to raise from its shareholders?
Mothercare plans to raise £32.5 million from its existing shareholders. This capital raise is a key part of its restructuring plan, with a deadline set for July 27 to secure the funds.
Q.What is the total number of UK stores Mothercare will operate after the CVA and Childrens World plan are completed?
What is the total number of UK stores Mothercare will operate after the CVA and Childrens World plan are completed?
After combining the exit of Childrens World and other aspects of the CVA, Mothercare will close 60 UK stores. This will leave the company with 77 stores by June of next year, of which 19 will have reduced rent.
Q.What happened to the Childrens World business that was part of the original restructuring plan?
What happened to the Childrens World business that was part of the original restructuring plan?
The Childrens World plan did not receive sufficient support from creditors and was therefore placed into administration. However, 13 of its 22 stores will be transferred to other Mothercare group companies to continue trading.
Q.What financial improvements does the company expect to see from the CVA and other initiatives?
What financial improvements does the company expect to see from the CVA and other initiatives?
The group has identified cost savings totalling £19 million as a result of the CVA and other initiatives. Also, there is an expected £10 million cash realisation arising from these plans.
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