Hong Kong-based Esprit is seeking to raise up to HK$5.2 billion (US$670 million) by way of a rights issue to execute its ‘transformation plan’.

The retailer, which famously conceded it had ‘lost its soul’, started embarking on its transformation in September last year by closing 64 loss making stores and divesting its unprofitable North American retail operations.

To continue the transformation, it will rebuild and revitalise the Esprit brand, overhaul the product engine, refurbish existing stores and points of sale, offer strategic support to the company’s wholesale partners and develop its supply chain.

The net proceeds will also be used to provide general working capital for the company and its subsidiaries.

“The directors have decided to undertake the rights issue to give the company financial flexibility and to provide funding for the execution of the transformation plan,” said Esprit chairman Raymond Or.

The company’s decision has surprised analysts as they say it will reflect high level of risk around the execution of the transformation plans.

“We are quite surprised that the company has chosen a rights issue over further debt funding. Earnings recovery is years away so we think investors will require a huge amount of patience,” said analyst Aaron Fischer of CLSA.

HSBC and UBS are the joint underwriters for the rights issue.

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