Mothercare CVA gets creditor approval
Struggling Mothercare said Friday that its company voluntary arrangement (CVA) proposals for certain of its subsidiaries had been approved by its creditors.
That means it will now be able to proceed with the previously-announced comprehensive measures to refinance its business and restructure its UK store portfolio.
Some stores will be closed while others will have their rents reduced for a limited period, allowing Mothercare to focus on more profitable locations and to save cash.
The creditors' meetings, which took in subsidiaries Mothercare UK Limited, Childrens World Limited and Early Learning Centre Limited, saw the proposals getting more than the required 75% support from unsecured creditors, although we don’t know how much support the firm got above that figure.
The company said that the CVA Proposals aren't expected to affect the ordinary course of operations of Mothercare plc, which continues to trade as a going concern under the control of its directors. “Mothercare plc is not, and will not be, in administration as a result of the approval by creditors of the CVA Proposals,” it stressed in a statement.
As part of its refinancing plan, il will also issue new shares in order to raise around £28 million. The company’s existing shares saw their price rising by around 8% Friday on news of the CVA approval, despite the company also falling out of the blue-chip FTSE 100 index into the lower-ranked FTSE 250 as of this week.
Further illustrating how vulnerable the UK retail sector is at present, Moss Bros also fell out of the FTSE 100 but M&S, which had come close, managed to avoid relegation to the FTSE 250. Dropping out of the top group of companies would usually be expected to dent a firm’s share price, but for Mothercare, the CVA approval news boosted the shares despite its relegation.
Clive Whiley, Interim Executive Chairman, said: "We are very grateful for the support of our many stakeholders across our creditor base in supporting today's CVA Proposals. Their forbearance and support today is a crucial step forward to achieve the renewed and stable financial structure for the business that will drive an acceleration of Mothercare's transformation. These measures provide a solid platform from which to reposition the group and begin to focus on growth, both in the UK and internationally."
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