Embattled retailer Carpetright has put jobs under threat as it draws up sweeping restructuring plans which will close poorly-performing stores and see it tap investors for up to £60 million.
The group said it was “exploring” a company voluntary arrangement to help shore up its financial position, a move which would allow it to close loss-making shops and secure deep discounts on rental costs.
If the CVA goes ahead, Carpetright would push through an equity issue of between £40 million and £60 million to fund plans to reboot the business and drive down debt.
The group, which has 409 UK shops, also agreed a £12.5 million unsecured loan from major shareholder Meditor to help with “short-term working capital requirements”.
It marked another dark day for Britain’s beleaguered high street, with Mothercare confirming that it had reached an agreement with lenders to defer the testing of its financial covenants as it “engaged in preliminary discussions” on securing additional financing.
Carpetright chief executive Wilf Walsh said it would be “business as usual” for the flooring firm’s stores during Easter and it would remain in “close contact” with staff over its restructuring plans.
He said: “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.”
Mr Walsh added: “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.”
He said it would be “business as usual” for stores during Easter trading and it would remain in “close contact” with staff over its restructuring plans.