Mothercare’s company voluntary arrangement (CVA) proposals have been approved by its creditors, giving the retailer the green light to shut down almost 50 stores and cull hundreds of jobs.
In a statement circulated this afternoon, Mothercare said the approval came after it held meetings with creditors today to consider the CVA proposals.
The retailer said they were approved by the requisite majorities of more than 75 per cent in value of the unsecured creditors of the companies present at each of the meetings in person or by proxy.
There is now a limited period expiring June 29 whereby a creditor may apply to challenge the CVA proposals in court.
The retailer said the CVA proposals would not affect its day-to-day operations, that and stores will continue to trade as normal for the time being.
Mothercare also stressed that the CVA approval does not mean the business has fallen into administration.
First launched on May 17, Mothercare’s CVA features comprehensive measures to refinance the business and to restructure its UK store portfolio.
The restructuring aspect includes plans to shutter 49 stores across its UK estate, affecting around 800 jobs among its 3000-strong workforce.
The babywear and maternity retailer has already reduced its UK store portfolio from 220 stores to 137 over the past four years. A decade ago it had 400.
It initially planned to bring it down to 92 outlets by 2023, but the approved CVA will now accelerate its closure plans and aim for 73 stores by 2022.
Meanwhile, Mothercare’s refinancing plans is a package worth up to £113.5 million, including £28 million raised through a new equity issue and revised debt facilities of £67.5 million provided by existing lenders.
Clive Whiley – a turnaround specialist who joined Mothercare as interim executive chairman less than two months ago – is thought to have played a key role in bringing elements of the CVA proposals together.
“We are very grateful for the support of our many stakeholders across our creditor base in supporting today’s CVA proposals,” he said.
“Their forbearance and support today is a crucial step forward to achieve the renewed and stable financial structure for the business that will drive an acceleration of Mothercare’s transformation.
“These measures provide a solid platform from which to reposition the group and begin to focus on growth, both in the UK and internationally.”
A CVA is a form of insolvency that allows retailers to shut loss-making stores, reduce rents and cut costs in a bid to keep the business in operation and avoid administration.
Several retailers – including household names New Look, Select and Carpetright have launched CVAs this year as a result of weak consumer confidence and rising costs due to Brexit-fuelled inflation.
Analysts predict more this year, such as House of Fraser’s confirmed CVA to be unveiled in June.
CVAs, along with the collapse of Toys R Us’ UK arm and Maplin, have left in their wake hundreds of vacant properties on the high street and a trail of job losses.