Off the floor
Struggling retailer Carpetright secures £15m high interest lifeline
EMBATTLED retailer Carpetright has secured a £15m lifeline as the group attempts to plot a path towards firmer financial ground.
The under-pressure flooring retailer has been handed an unsecured £15m loan, with an 18pc interest rate and £2.25m arrangement fee, from major shareholder Meditor European Master Fund Limited.
In a stock market announcement, the retailer said it would “assist the company with short-term working capital requirements”.
Investors sent the company’s shares down 6.8pc to 37p yesterday following the update.
It marks the second time Carpetright has tapped the investor for finance after it was granted a £12.5m loan from Meditor on March 21.
The latest move is a precursor to a £60m rights issue that is set to be announced next week as Carpetright eyes a reprieve from the pressure on its finances. Carpetright put 300 jobs at risk last month when it announced plans to close 81 stores.
Creditors overwhelmingly backed its restructuring plans.
It is pushing through the change as part of a company voluntary arrangement (CVA), which allows companies to shut loss-making stores and secure deep discounts on rents.
Rents on a further 113 sites are also set to be slashed as part of efforts to restructure the business.
Carpetright said last month that it was expecting to record an underlying pre-tax loss of between £7m and £9m for the year ending April 28 after likefor-like sales tumbled by 10.5pc in the final quarter.
Rival carpet seller Tapi is looking to seize control of some Carpetright stores following the restructuring, according to reports.
Lord Harris, who founded Carpetright before leaving to join Tapi, told Retail Week magazine that the firm was in talks with a number of Carpetright’s landlords.
Carpetright launched its first store in 1988 and has grown to become the biggest operator in the sector across Europe.
The bitter weather at the start of the year has piled more pressure on the retail sector, which is already struggling with waning consumer confidence, the shift to online, and escalating costs.
Hikes to the National Living Wage, inflation and rising taxes sparked by last year’s business rates revaluation have squeezed margins.
Discount retailer Poundworld and department store chain House of Fraser are among the retailers pursuing CVAS, while New Look has already slashed jobs and made swingeing cuts to its store estate through the restructuring process.