Carpetright launches share issue to fund turnaround
Carpetright has kick-started efforts to raise £60m (€68.6m) in emergency funding as the struggling retailer pushes through a painful restructuring.
The embattled flooring firm, which is also embarking on a store closure programme, said on Friday that it has strong support from shareholders and other investors for the proposal, which will see it issue 232.5 million new shares at 28p each.
However, the move is dependent on approval at an annual meeting and the completion of Carpetright's Company Voluntary Arrangement, an insolvency procedure which will allow the retailer to shut 81 stores and secure rent reductions on others.
Chief executive Wilf Walsh said: "We are delighted to have received such strong support from our shareholders and other investors in achieving this fully underwritten fundraise.
"The £60m proceeds from the placing and open offer will give us the resources we need to complete our restructuring and accelerate our recovery plan.
"As well as funding implementation of the CVA to create a right-sized estate of stores on sustainable rents, it will provide the necessary capital to refurbish and modernise the ongoing store estate and to upgrade our digital platform - both vital investments in our future."
Carpetright recently took out a high-interest £15m loan from Meditor to help the company with short-term working capital requirements.
Meditor also provided an unsecured loan to Carpetright worth £12.5m in March, which will be repaid through the proceeds of the equity fundraising.
A total of £6m of the new funding will cover the costs associated with implementing the CVA and £33m will bankroll the group's capital expenditure requirements.
"We believe that a recapitalised market leader will ultimately be better for customers, suppliers, landlords and shareholders," Mr Walsh said.
Last month, the company said it was expecting to book a full-year underlying pre-tax loss of between £7m and £9m, compared with a £14.4m profit last year.
The group also bemoaned difficult trading in the final quarter, which saw like-for-like sales plummet 10.5pc. For the full year, comparable sales dipped 3.6pc.
The retail sector has already seen thousands of jobs axed following the collapse of well-known names Toys R Us and Maplin.
High street retailers have been hit by a drop in consumer spending, soaring costs and the increasing threat of online competitors.