Tuesday 20 March 2018 10:03 am

KPMG appointed to handle Mothercare refinancing

Mothercare has called in KPMG to advise on a refinancing of the business, City A.M. can reveal.

The retail chain is in talks with its lenders about raising money for a turnaround and has drafted in KPMG to advise on securing waivers to its financial covenants.

Mothercare's share price fell by more than 10 per cent yesterday as the market took a poor view of the retail sector.

Read more: Mothercare's struggles reflect the UK high street's malaise

This week, creditors will vote on whether to approve New Look's company voluntary agreement (CVA), which will allow the retailer to reduce its rents and shut 60 stores. Floorings specialist Carpetright is also exploring a CVA.

A spokesperson for Mothercare said the decision to go to the lenders reflected the challenging trading environment on the high street, and seasonal changes to the firm's cash levels.

"We are working with our financing partners with respect to our financing needs for FY19 and beyond," the spokesperson said.

"We are also exploring additional sources of financing to support and maintain our transformation programme. All of these discussions are ongoing and we will update the market on developments as required."

Last summer, Mothercare refinanced after discussions with its lenders HSBC and Barclays.

Read more: Carpetright's shares slide on news of possible store closures

Mothercare altered its £50m facility to a £62.5m revolving credit facility, and a £5m overdraft; £12.5m of the revolving credit facility matures in November this year, although there is an option for Mothercare to extend the facility for six months with the lenders’ approval.

At time of writing, Mothercare's share price was down six per cent to 13.8p.

‘Mothercare are in many ways an institution in UK retail, but the business has been in trouble for some time, with market share eroded principally by online competitors, that in many ways provide a convenient and also often cheaper alternative to Mothercare products," said Jonathan De Mello, head of retail consultancy at Harper Dennis Hobbs.

"Mothercare’s high street stores have been historically their poorest performers – with retail warehouse park stores among their strongest stores."

 

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