Mothercare puts CVA on shopping list
Mothercare has joined the list of high street retailers looking to set up a company voluntary arrangement (CVA) proposal, which will be supervised by KPMG if the company’s proposals are successful
21 May 2018
Jim Tucker, restructuring partner at KPMG and a proposed supervisor of the CVA, said: ‘For over 50 years, Mothercare has been one of the UK’s most trusted and familiar brands. But like many other traditional retailers, in recent years the Group has been adversely affected by the consumer shift to online shopping, as well as the trend of declining footfall.
‘Today’s comprehensive proposals to create a fully refinanced, restructured business will allow an accelerated transformation of the business and are a crucial part of Mothercare’s drive to a viable and sustainable future.’
Tucker said the CVA would form part of a wider financial and operational restructuring plan which would see the retailer moving to a smaller, more profitable estate, with a business model more aligned to the emerging multi-channel retail environment.
Mothercare currently operates 134 leased stores across the UK. The company is proposing CVAs in respect of its three lessee entities, Mothercare UK Ltd, Early Learning Centre Ltd, and Children’s World Ltd, which will divide the company’s sites into three categories.
For a total of 64 ‘category 1’ stores, the leases will be retained at current rents. For a further 21 ‘category 2’ sites, a reduced rent, equivalent to 50%, will be paid for three years.
Finally, for a total of 49 ‘category 3’ stores, a reduced rent, equivalent to 35%, will be paid for 12 months while the company engages with landlords to agree the basis of any continued trading from these premises.
Will Wright, restructuring partner at KPMG and second proposed supervisor of the CVA, said: ‘Claims for dilapidations on exited stores, and intra-group payables, will also be compromised. It is important to stress that no stores will close on day one, and suppliers will continue to be paid on time and in full.’
Mothercare needs to secure at least 75% creditor approval for the CVA for it to proceed. A detailed proposal document is available to creditors via a dedicated website today, and creditors will vote on the CVA on 1 June.
Report by Pat Sweet