Carpetright said yesterday it was exploring a Company Voluntary Arrangement (CVA) to help shore up its financial position, a move which would allow it to close loss-making shops and secure deep discounts on rental costs.
The group said that if the CVA gets the go‑ahead from its landlords and creditors it would also instigate an equity issue of between £40m and £60m to fund plans to reboot the business and drive down debt.
The retailer, which has issued a series of profit warnings amid weak consumer spending, said it had also agreed a £12.5m loan from one of its investors, Meditor, in exchange for 5 per cent of new shares
Carpetright, which has 409 UK shops, said the transaction was in order to help with “short-term working capital requirements”.
It marked another difficult day for Britain’s beleaguered high street, as fashion retailer New Look also agreed a restructuring plan with creditors that will see it put the shutters up at 60 stores, resulting in the loss of up to 980 jobs.
Under the terms of the Company Voluntary Arrangement, the firm has also secured rent reductions on nearly 400 stores. Carpetright chief executive Wilf Walsh said it would be business as usual for the flooring firm’s stores during Easter and it would remain in close contact with staff over its restructuring plans.
Walsh said: “I am pleased that we have secured this additional support from one of our major shareholders as we continue to explore the feasibility of a CVA and a conditional equity issue.
“These further cash resources will enable us to make the necessary decisions free from short-term funding pressure.
“The aggressive store opening strategy pursued by the company’s previous leadership has left Carpetright burdened with an oversized property estate consisting of too many poorly located stores on rents which are simply unsustainable.”
l Sofas and floorings group ScS revealed that it had bounced back into the black at the halfway mark, with pre-tax profits of £200,000 in the six months to 27 January 2018, compared with a £2.6m loss in the same period of the previous financial year.
The interim dividend is hoisted 8.2 per cent to 5.30p, compared with 4.90p last time.