Mothercare seeks covenant waivers and additional finance

Published on: 2nd March 2018

The retailer is seeking waivers of some of its financial covenants and looking at ways of raising further cash as it attempts a turnaround.

According to a report in Retail Week, the retailer revealed the information in a Stock Exchange filing following media speculation about its health and a fall in its share price.

Mothercare said in a statement: “Reflecting the more challenging trading environment and our seasonal cash flows, we are working with our financing partners with respect to our financing needs for FY19 and beyond.”

“We forecast our borrowings to increase towards the limit of our total committed and non-committed facilities at various points from the start of the new financial year, and will therefore require waivers of certain financial covenants. We are also exploring additional sources of financing to support and maintain the momentum of our transformation programme. All of these discussions are ongoing.”

The retailer said that since its trading update in early January “our trading and financial performance has remained broadly in line with the board’s expectations”.

Net debt at year-end is now expected to be “slightly better than the £50 million previously guided”, while profits will be “at the lower end of the previously guided range of £1m-£5m.”

Mothercare chief executive Mark Newton-Jones, commented: “The retail sector continues to face a number of pressures that are clearly having a profound impact on the sector as a whole.

“Against this backdrop we are performing in line with our expectations and remain a cash generative business, but we also need to push ahead with our transformation strategy to meet our customers’ needs and continue adapting to evolving shopping habits around the world.”

“We are working together with all our stakeholders including colleagues, franchisees, financiers, suppliers and pensions trustees on this next phase of our transformation and their part in delivering these plans. The support already being shown gives us confidence that, despite the challenges, there remains a clear way forward for Mothercare to realise its ambition to be the leading global retailer for parents and young children.”

Toy World also understands that several credit insurers have pulled cover from Mothercare, after its share price dropped dramatically in the past few days.


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