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.”
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.