- Group to announce major restructuring programme on Thursday
- Mothercare shares down 9% on news of the cash shortfall
Troubled retailer Mothercare has confirmed it will tap investors for more cash as part of a major restructuring programme to be announced later this week, as it struggles to turn itself around.
The mother and baby products retailer, which has seen sales fall amid tougher competition, said it was finalising a ‘comprehensive restructuring and refinancing package’ to put the business back on a ‘stable’ financial footing.
The restructuring is likely to take the form of a Company Voluntary Agreement (CVA), the same type of restructuring recently adopted by other struggling retailers like Carpetright and New Look.
Restructuring: Mothercare will unveil details on Thursday along its annual results
The CVA, which must be approved by landlords, should allow Mothercare to shut stores and slash rents in exchange for fresh financing.
‘We are in the final stages of detailing these restructuring plans alongside new committed debt facilities, an underwritten equity issue and access to other sources of capital which we intend to announce with our final results,’ the company said in a statement today.
Shares in Mothercare, which is set to publish its final results on Thursday, fell by 9.4 per cent to 18p following the update.
The announcement comes after reports last week suggesting that the company was likely to be the latest retailer to unveil a CVA.
This type of arrangement has been adopted recently by several other struggling retailers like Carpetright, New Look, Poundworld as well as restaurants Jamie’s Italian restaurants and chain Prezzo.
It comes as Mothercare has appointed investment bank Rothschild to find external backers help it stay afloat.
Accountant KPMG is also in talks with HSBC and Barclays over the chain’s existing debts.
The group is expected to post a 95 per cent fall in underlying pre-tax profits to just £1million in the year to March, according to City analysts. The figure compares with a profit of £19.7million last year.
Last month, it announced its chairman Alan Parker was stepping down with immediate effect.