5th Nov 2019 17:42
(Alliance News) - Mothercare PLC on Tuesday said it appointed Zelf Hussain, Toby Banfield, and David Baxendale of PricewaterhouseCoopers LLP as administrators to its subsidiaries Mothercare UK Ltd and Mothercare Business Services Ltd.
The retailer of products for expectant mothers said that it and its other subsidiaries are not in administration, hence, it will be free to continue to trade in the "normal course" of business.
Back in May, Mothercare said its strategic aim was to progress the next phase of transformation of the business by securing a financial structure for the whole of the Mothercare and to evolve, adapt and optimise the model for its UK retail operations.
Since May, the company said it has undertaken a root and branch review of its operations and it has become clear that the UK retail operations - which include 79 stores - are not capable of returning to a level of "structural profitability".
Having taken insolvency and legal advice, Mothercare UK and Mothercare Business Services decided that there was "no reasonable alternative but to appoint administrators".
On Tuesday, the company said the administrators' primary responsibility will now be to establish the liabilities of both subsidiaries and to realise their assets in order to make a distribution to creditors.
"It is with deep regret and sadness that we have been unable to avoid the administration of Mothercare UK and Mothercare Business Services, and we fully understand the significant impact on those UK colleagues and business partners who are affected. However, the board concluded that the administration processes serve the wider interests of ensuring a sustainable future for the company, including the wider group's global colleagues, its pension fund, lenders and other stakeholders," explained Chair Clive Whiley.
Also on Tuesday, Mothercare said it is taking further steps in the restructuring to return to being a "sustainable and profitable" business.
The core elements of the transformation include dialogue in the UK with potential partners to maintain Mothercare presence both in store and online, and strengthening of the financial position of the company.
The children clothes retailer said 32.4 million of its shares were placed at a price of 10 pence each, raising gross proceeds of GBP3.2 million. The placing price represents a premium of 14% to the middle market price.
Mothercare shares closed 13% higher in London on Tuesday at 9.50p each, giving it a market capitalisation of GBP32.5 million.
In addition, the company said it has agreed for the provision of a GBP5.5 million tranche of unsecured convertible loan notes.
Meanwhile, an existing GBP24 million bank debt facilities will be paid down by the administration process, Mothercare said.
The company also said it has identified up to GBP50 million of further financial capacity potentially available from third parties, including a standby underwritten equity issue and a new term loan facility, amongst other sources.
"The changes announced are the final steps in the recovery of Mothercare as a group. As a result of which, we believe Mothercare will return to being a profitable and sustainable business as we enter the next financial year. We look forward to returning to growth and cash generation in financial 2021 and beyond," said Whiley.
By Evelina Grecenko; [email protected]
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