Carpetright has agreed an unsecured loan with major shareholder Meditor for £12.5m, which the retailer says will be used to assist with short-term working capital requirements as it explores the feasibility of a Company Voluntary Arrangement (CVA).
On 1st March, Carpetright announced that it was examining a range of options to accelerate the turnaround of the business and strengthen its balance sheet – the objective of a CVA would be to reduce the number of stores through which it operates.
Following that, the company plans to raise between £40-£60m through an equity issue, which would be used to fund the group's ongoing strategy, reduce debts and cover the costs associated with the CVA.
CEO Wilf Walsh says: "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. The company has worked hard over recent years to address this legacy issue and reduce the size of its property estate, however many of these poor-performing stores still have long leases to run, which has limited our ability to exit a meaningful number in the short-to-medium term.
“While the board is confident that its brand investment and store refurbishment strategies have been, and will continue to be, successful in enabling Carpetright to respond to increased competition, it believes additional measures are necessary to directly address this legacy property issue. The board is therefore exploring the feasibility of a CVA in order to expedite the rationalisation of its property portfolio, with the clear objective of establishing a right-sized estate of contemporary stores, on economic rents, complemented with a compelling online offer. The conditional equity issue, which is intended to follow a successful CVA, would recapitalise the group and we believe provide the necessary funds to accelerate its turnaround and address the competitive threat from a position of financial strength.
“In the interim, it is very much business as usual for all of our stores and we look forward to serving customers through the important Easter trading period. In tandem, we will remain in close contact with all colleagues to keep them fully informed as we move through this process.”