- The loan has an interest rate of 18% per year and is due to be repaid in 2020
- Shares in Carpetright down 5% in morning trading following the update
Struggling retail chain Carpetright has secured £15million of emergency funding from a ‘substantial shareholder’ to plug a cash shortfall.
Britain’s biggest carpet seller, which is preparing to pull the plug on 81 stores as losses widen, said it obtained the unsecured loan from Meditor European Master Fund.
The loan, which has an interest rate of 18 per cent per year, will be paid in a lump sum at the end of the loan’s term on July 31 2020.
Shares in the small cap firm fell 5.2 per cent to 37.64p in morning trading.
Emergency funding: Carpetright obtained the loan from Meditor European Master Fund
Lat month, Carpetright warned full-year losses would be twice the amount previously expected.
The company said it expected to make a loss in the region of £7million to £9million for the year ending April 28 – twice as much as the £4.3million loss analysts had predicted.
The warning came just days after Carpetright got the green light from shareholders to close 81 stores and negotiate down the rents on 113 under a Company Voluntary Agreement. A total of 300 jobs are at risk as a result of the CVA.
Meditor also provided an unsecured loan to Carpetright worth £12.5million in March, which is expected to be repaid through the proceeds of its pending equity fundraising.
Carpetright hopes to persuade investors to buy £60million of shares through a rights issue later this month to put the company on a firmer financial footing.
Carpetright’s crisis is one of many on the high street. Last month Poundworld unveiled plans to shut 100 stores across the UK, putting around 1,500 jobs at risk.
It comes as other big names like New Look, Byron and Prezzo also were forced to pursue CVAs this year, while Toys R Us and Maplin collapsed into administration.
High street retailers have been hit by a drop in consumer spending, soaring costs and the increasing threat of online competitors.