Carpetright closes 92 stores through CVA
Carpetright is to close 92 stores, cut up to 300 jobs and reduce the size of its UK property estate and rental cost base through a company voluntary arrangement (CVA)
12 Apr 2018
The company has finalised the terms of a CVA to restore the viability of the group's business model and allow a fundamental restructuring of its property portfolio to stave off closure.
A review of the property portfolio identified 205 sites in the UK that are underperforming and/or on unfavourable lease terms, or, in certain cases, not expected to have significant strategic value to the company going forward.
Of these, 92 sites will be closed imminently under the CVA proposal, while Carpetright will negotiate reduced rental costs and revised lease terms at a further 113 sites. In the UK Carpetright currently has over 400 stores.
In a statement to the London Stock Exchange, Carpetright said: ‘Save for landlords compromised by the CVA, the CVA proposal will not seek to compromise claims of any other creditors.
‘The launch of the CVA process does not affect the current ordinary course operations of the group and the business continues to trade as a going concern.’
In addition, Carpetright plans to raise additional funding of approximately £60m through an equity capital raising (expected to be by way of a placing and open offer).
These proceeds will be used to fund the group going forward, reduce debts and cover the costs associated with the CVA.
The equity capital raising exercise will start around 18 May 2018, after the CVA meetings, and needs to be completed by early June 2018, subject to the CVA proposal having been approved at each of the meetings as planned.
Stakeholders can object to the CVA, although this happens rarely. The detailed terms of the CVA proposal, including details of the creditor and shareholder meetings to implement it, are contained in the CVA proposal document that is intended to be made available to all unsecured creditors and shareholders of the Company later today.
Wilf Walsh, Carpetright CEO said: ‘These tough but necessary actions will enable us to address the burden of a legacy UK property estate consisting of too many poorly located stores on unsustainable rents and are essential if we are to restore our profitability and deliver a successful turnaround. Carpetright has engaged fully with the British Property Federation on the detail of the CVA Proposal and we thank them for their constructive approach.
‘Completion of the CVA and equity financing will enable us to establish an appropriately-sized estate of modernised stores, on economic rents, complemented with a compelling online offer, enabling Carpetright to address the competitive threat from a position of strength.
‘We will remain in close contact with all colleagues to keep them fully informed as we move through this process.’
Report by Sara White