205 stores could close under Carpetright’s proposed CVA
Just 195 of Carpetright’s 426 UK stores are considered core to the business, while it needs a further £15m of funding before raising £60m from shareholders in early June: just over three weeks since raising £12.5m from shareholder Meditor.
It has told landlords that accepting the terms of the Company Voluntary Arrangement will see them better of than if the company goes into administration or liquidation.
Under the CVA rent on its 195 core stores will be paid monthly; 82 stores will see rent cut by 30% with a 5% rent rise in lieu of dilapidation liabilities and rent paid monthly and can be closed in two and three years; 31 stores will see rent cut by 50% with a 5% rent rise in lieu of dilapidation liabilities and rent paid monthly and can be closed in 18 months time.
A further 81 stores will be closed in September along with 11 which are non-trading with rents cut by 50% until then.
The group says it will offer £600,000 to affected landlords.
If landlords accept the CVA, Carpetright will then look to raise £60m from shareholders in May, looking to receive the cash in early June. However it warned that it needs to extend its bank borrowings and secure £15m to have sufficient working capital before then. In order to do this it will ask shareholders to change its articles of association on 30 April: until then it is unable to increase its borrowings as it has breached a limit on its borrowings. The chain said its banks have agreed to relax certain covenants and other terms related to its borrowings in order to address the short term funding shortfall that could otherwise arise. ‘The directors currently believe that the group has sufficient working capital available to satisfy its funding requirements up to the date when the matter will be put to a shareholder vote,’ it added.