Mothercare’s financial covenant tests deferred

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Mothercare update

Mothercare’s lenders have agreed to defer the testing of its financial covenants as it continues to come to terms with its financial turmoil.

The maternity and baby products retailer confirmed that discussions with its lenders on the terms of its existing financial facilities were “progressing constructively” and financial covenant tests due on March 24 have been deferred.

It expected those discussions to conclude before May 17, the scheduled date for the announcement of its preliminary results.

The news comes after Mothercare appointed KPMG to help it negotiate waivers on its loan agreements and secure funds to launch a turnaround following media speculation about its financial health and a fall in its share price.

The retailer said it was also exploring additional sources of financing to “support and maintain the momentum of our transformation programme and we are engaged in preliminary discussions on securing such additional financing”.

Mothercare’s shares have rallied by almost 10 per cent since the news after a period of sharp decline.

The retailer has been struggling to stay afloat since late last year when it revealed losses of £700,000 amid its interim results, despite a transformation plan that is currently in the works.

Shortly afterwards in the Christmas trading period, Mothercare also failed to perform, leading to two profit warnings this year and an overall 76 per cent drop in its share prices.

It is understood Mothercare already refinanced with its creditors Barclays and HSBC last summer, altering its £50 million credit facility to a £62 million revolving credit facility, which is due to mature in November.

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