Carpetright Secures Loan As Considers Voluntary Insolvency, Equity Raise (ALLISS)

21st Mar 2018 10:09

LONDON (Alliance News) - High street flooring retailer Carpetright PLC said Wednesday it has secured a GBP12.5 million loan for short-term working capital purposes as it considers voluntary insolvency to address legacy property issues, and also proposed a potential share placing.

Carpetright entered into an unsecured loan worth GBP12.5 million from Meditor European Master Fund Ltd. The loan - which bears a 3% per annum interest rate - is due for repayment at the end of August.

In order to pay GBP1.4 million of the GBP1.9 million arrangement fee, Carpetright will issue 3.4 million shares at 40.6 pence each. The issued shares represent 5.0% of Carpetright's share capital prior to the issue.

Admission to trading is expected next Monday, after which Carpetright will have 71.3 million shares outstanding.

"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," Carpetright Chief Executive Officer Wilf Wright said. "These further cash resources will enable us to make the necessary decisions free from short-term funding pressure."

Carpetright was considering a company voluntary arrangement - or voluntary insolvency - in order to address its "legacy property issues".

"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," Wright added. "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 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," Wright added. "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."

After the CVA, Carpetright proposes to raised between GBP40 million and GBP60 million through an equity raise. Should this occur, the cash would be used to fund its "on-going strategy, reduce indebtedness and cover the costs associated with the CVA", the company explained.

"The conditional equity issue, which is intended to follow a successful CVA," Wright continued, "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," Wright concluded. "In tandem, we will remain in close contact with all colleagues to keep them fully informed as we move through this process."

Shares in Carpetright were 1.0% higher at 41.00 pence on Wednesday.

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