TIDMCPR
RNS Number : 6823K
Carpetright PLC
12 April 2018
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM AUSTRALIA, CANADA,
JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL
TO DISTRIBUTE THIS ANNOUNCEMENT
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Carpetright plc
("Carpetright" or the "Company" or the "Group")
CVA Proposal
Equity capital raise update
Trading update
and
Ratification of technical breach of borrowing limit
Summary
Carpetright is today announcing a proposal to address its legacy
property issues and reduce the size of its UK property estate and
rental cost base by the implementation of a company voluntary
arrangement ("CVA").
-- The directors of the Company have finalised
the terms of a CVA which is intended
to restore the viability of the Group's
business model (the "CVA Proposal").
The CVA Proposal will enable the Group
to undertake a fundamental restructuring
of its property portfolio that the
Board believes must be carried out
as part of implementing the Group's
revised business plan.
-- A comprehensive review of the Company's
property portfolio has 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 have been identified for closure
in the short term under the CVA Proposal,
with the balance of 113 sites being
subject to a reduction in rental costs
and revised lease terms.
-- 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.
-- 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.
-- Carpetright will seek creditor approval
of the CVA Proposal at a meeting to
be held on 26 April 2018. Approval
from Carpetright shareholders will
be sought at a meeting to be held on
30 April 2018 ("CVA Meetings").
-- In addition, Carpetright currently
expects to raise net proceeds of approximately
GBP60 million 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's on-going
strategy, reduce indebtedness and cover
the costs associated with the CVA.
The Company expects to launch the equity
capital raising on or around 18 May
2018, after the CVA Meetings, and to
have received the proceeds in early
June 2018, subject to the CVA Proposal
having been approved at each of the
meetings as planned and subject to
there having been no successful challenge
to the CVA Proposal.
-- Since the Company last updated the
market on 1 March 2018, trading conditions
have remained difficult. However, in-line
with the announcement on 1 March 2018,
the Group still expects to report a
small underlying pre-tax loss for the
year ending 28 April 2018 ("FY18").
The Company now expects to provide
the market with a scheduled trading
update for FY18 on or shortly after
30 April 2018, being the day on which
the shareholder meeting is due to take
place.
-- In addition, a technical breach has
been identified with respect to compliance
with the borrowing powers in the Company's
Articles of Association (the "Articles").
Today, the Company intends to post
a shareholder circular which includes
the appropriate resolutions to ratify
this breach and to amend its Articles
to prevent future breaches. The general
meeting will held on 30 April 2018.
Commenting on the CVA Proposal, 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."
Stephanie Pollitt, Assistant Director of Real Estate Policy,
British Property Federation (BPF) comments:
"These situations are never easy as landlords need to take into
consideration the impact on their investors, including those
protecting pensioners' savings, as they vote on the CVA
proposal.
Carpetright and Deloitte, however, have demonstrated best
practice, constructively engaging with the BPF early in the process
and ensuring landlords' interests have been properly taken into
account. Ultimately, it will be for individual landlords to decide
how they will vote on the CVA, but the proposal has sought to find
a solution that works for all parties."
This summary should be read in conjunction with the full text of
the announcement.
Enquiries:
Carpetright plc
Wilf Walsh, Chief Executive
Neil Page, Chief Financial
Officer 01708 802000
Peel Hunt LLP (Sponsor and
joint broker)
Dan Webster
George Sellar
Nicole McDougall 020 7418 8900
Deutsche Bank AG (Joint broker)
Simon Hollingsworth
Adam Miller 020 7545 8000
Citigate Dewe Rogerson (Financial
PR)
Kevin Smith
Nick Hayns 020 7638 9571
Deloitte LLP
Will Black, PR Manager 0207 007 8242
British Property Federation 020 7802 0113
Drew McNeill, PR Manager dmcneill@bpf.org.uk
Notes to editors
Carpetright plc is Europe's leading specialist floor coverings
and beds retailer. Since the first store was opened in 1988 the
business has developed both organically and through acquisition
within the UK and other European countries. The Group is organised
into two geographical regions, the UK and the Rest of Europe
(comprising The Netherlands, Belgium and the Republic of
Ireland).
This announcement does not constitute an offer to sell, or a
solicitation of offers to purchase or subscribe for, securities in
the United States. The securities referred to herein have not been,
and will not be, registered under the US Securities Act of 1933, as
amended (the "Securities Act"), and may not be offered, exercised
or sold in the United States absent registration or an applicable
exemption from registration under the Securities Act.
Peel Hunt LLP ("Peel Hunt") is authorised and regulated by the
Financial Conduct Authority (the "FCA") and is acting exclusively
for the Company and no one else in relation to the matters referred
to herein and is not, and will not be, responsible to anyone other
than the Company for providing the protections afforded to its
clients or for providing advice in relation to the contents of this
document or any other matter referred to herein.
Deutsche Bank AG, London Branch ("Deutsche Bank") is authorised
under German Banking Law (competent authority: European Central
Bank) and, in the United Kingdom, by the Prudential Regulation
Authority (the "PRA"). It is subject to supervision by the European
Central Bank and by BaFin, Germany's Federal Financial Supervisory
Authority, and is subject to limited regulation in the United
Kingdom by the PRA and the FCA. Details about the extent of its
authorisation and regulation by the PRA, and regulation by the FCA,
are available on request or from
www.db.com/en/content/eu_disclosures.html. Deutsche Bank is acting
exclusively for the Company and no one else in connection with the
matters referred to herein, and Deutsche Bank is not, and will not
be, responsible to anyone other than the Company for providing the
protections afforded to its clients or for providing advice in
relation to the contents of this document or any other matter
referred to herein.
No representation or warranty, express or implied, is or will be
made as to, or in relation to, and no responsibility or liability
is or will be accepted by Peel Hunt or Deutsche Bank or by any of
their respective affiliates or agents as to, or in relation to, the
accuracy or completeness of this announcement or any other written
or oral information made available to or publicly available to any
interested party or its advisers, and any liability therefore is
expressly disclaimed.
Carpetright plc
("Carpetright" or the "Company" or the "Group")
CVA Proposal
Equity capital raise update
Trading update
and
Ratification of technical breach of borrowing limit
CVA Proposal and equity capital raise update
Further to its announcement of 21 March 2018, the Company is
today announcing full details of its CVA proposal.
The directors of the Company have now finalised the terms of the
company voluntary arrangement to be proposed to unsecured creditors
and shareholders of the Company (the "CVA Proposal"). A company
voluntary arrangement or "CVA" is a formal statutory procedure
which enables a company to agree with its unsecured creditors a
composition in satisfaction of its debts or an arrangement of its
affairs which can determine how its debts should be paid and in
what proportions.
The terms of the CVA Proposal are contained in a document (the
"CVA Proposal Document") that is intended to be made available to
unsecured creditors and shareholders of the Company later today by
the nominees, Matthew David Smith and Neville Barry Kahn of
Deloitte LLP, nominated in relation to the CVA Proposal.
A summary of the key terms of the CVA Proposal follows
below:
-- The CVA Proposal will enable the Group
to undertake a fundamental restructuring
of its property portfolio that the
Board believes must be carried out
as part of implementing the Group's
revised business plan. The Board believes
that the CVA Proposal, if approved
and implemented as planned by the Company,
will demonstrably give landlords of
compromised sites a far greater return
than the amount it is estimated that
unsecured creditors would receive if
Carpetright were to be placed in administration.
-- The directors, together with their
advisors, have carried out a comprehensive
review of the Company's property portfolio
and have 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. On the basis
of this review, the leases have been
categorised into three categories,
and the CVA Proposal has been structured
so as to effect the necessary restructuring
of each category of leases to implement
the revised business plan. The CVA
Proposal distinguishes between (i)
sites that are performing adequately
or are core to the future business
("Category A Premises"), (ii) sites
that are underperforming by virtue
of being marginally profitable and/or
where property costs are above market
and a rent reduction is necessary to
restore the medium to long term viability
of these sites ("Category B Premises")
and (iii) sites that are underperforming
and/or on unfavourable lease terms
or, in certain cases, are not expected
to have future strategic value to the
Company ("Category C Premises").
-- In respect of Category A Premises,
the CVA Proposal will temporarily vary
the terms of the 195 Category A Premises
so that principal rent, service charge
and insurance will be paid on a monthly
rather than quarterly basis for a period
of 3 years from the Next Payment Date
(being the later of 24 June 2018 and
the next rent payment date).
-- In respect of Category B Premises,
the CVA Proposal will vary the terms
of the leases of the 113 Category B
Premises so that rent will be reduced
and the principal rent, service charge
and insurance will be paid on a monthly
rather than quarterly basis for a period
of 3 years from the Next Payment Date
(the "Rent Concession Period"). The
Category B Premises have been split
into two sub-categories, being Category
B1 Premises and Category B2 Premises,
based on the rent reduction. The applicable
rent reductions for the two sub-categories
during the Rent Concession Period will
be as follows:
o 30 per cent. reduction on the amount
of rent payable on the 82 Category
B1 Premises (with an additional 5 per
cent. of rent being paid in lieu of
all dilapidations liabilities); and
o 50 per cent. reduction on the amount
of rent payable on the 31 Category
B2 premises (with an additional 5 per
cent. of rent being paid in lieu of
all dilapidations liabilities);
-- The CVA Proposal will also allow the
Group to terminate the leases of Category
B2 Premises on or after 18 months from
the date on which the CVA is approved
at the creditors' meeting (the "Effective
Date") and Category B1 Premises on
the Second and Third anniversaries
of the Effective Date.
-- In respect of Category C Premises,
the CVA Proposal will enable the closure
of 92 sites on or after 23 September
2018, with reduced rent of 50 per cent.
to be paid for the period between the
Next Payment Date and 23 September
2018 (with an additional 5 per cent.
of rent being paid in lieu of all dilapidations
liabilities).
-- The CVA Proposal will provide for a
fund of GBP600,000 to be available
to make payments to compromised landlords
that will be payable no later than
the date falling 34 months after the
Effective Date.
-- The detailed terms of the CVA Proposal,
including details of the creditor and
shareholder meetings, 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.
The Company will remain liable for rates on the closed sites
until those sites are surrendered, forfeited or assigned or the
leases are terminated on the date which is the earliest possible
date on which a break clause could be exercised under the lease.
Save as set out above in general terms, 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. The Company is not in and will not be
in administration as a result of commencing the CVA process.
The CVA Proposal Document contains notices of meetings of the
unsecured creditors and shareholders of the Company (together, the
"CVA Meetings") to consider and, if thought fit, approve the CVA
Proposal. To become effective, the CVA for the Company requires the
approval of the requisite majority of the unsecured creditors of
the Company. A majority of 75 per cent. in value of the unsecured
creditors of the Company voting in person or by proxy at the
creditors' meeting is required. Further, of those creditors of the
Company whose claims have been admitted for voting at the
creditors' meeting, at least 50 per cent. in value of the unsecured
creditors who are unconnected must also vote in favour of the
CVA.
A CVA also requires the approval of more than 50 per cent. in
value of the shareholders present in person or by proxy and voting
at a meeting on the resolution to approve the CVA. However if the
outcome of the meeting of shareholders differs from the outcome of
the meeting of a company's creditors, the decision of the creditors
will prevail, subject to the right of any shareholder to apply to
the Court to challenge the approval of the CVA.
Implementation of the CVA will be conditional upon a successful
equity capital raising. In order to meet the Company's ongoing
funding requirements, the Directors expect that the net proceeds
required to be raised under the equity capital raising will be
approximately GBP60 million. These proceeds will be used to fund
the Group's on-going strategy, reduce indebtedness and cover the
costs associated with the CVA. Carpetright currently expects to
launch the equity capital raising and to publish a combined
shareholder circular and prospectus on or around 18 May 2018, after
the CVA Meetings, and to hold a general meeting of shareholders and
to have received the proceeds of the equity capital raising in
early June 2018, subject to the CVA Proposal having been approved
at each of the meetings as planned and subject to there having been
no successful challenge to the CVA Proposal.
The equity capital raising will require agreement from the
Company's lenders to grant an extension of the Company's revolving
credit facility ("RCF") and the Company is about to start
discussions with the lenders in relation to such extension. The
Company will also require additional interim funding of up to GBP15
million so as to ensure that it has sufficient working capital
until such time as the proceeds of the equity capital raising have
been received. The Company is currently in discussions with a key
stakeholder in relation to obtaining this interim funding.
Therefore, full implementation of the CVA is also effectively
conditional upon (i) the terms of an extension to the RCF being
agreed with the lenders and (ii) interim additional funding being
secured.
The directors of the Company and the nominees are firmly of the
view that the CVA Proposal and the CVA process in general will
facilitate a better outcome for creditors than would occur if the
Group were placed into administration or liquidation.
The CVA Meeting for creditors of the Company will be held at
2.30 p.m. at Etc. Venues, Riverside Building, Belvedere Road,
London SE1 7PB on 26 April 2018.
The CVA Meeting for shareholders of the Company will be held at
10.00 a.m. at Travers Smith LLP, 10 Snow Hill, London EC1A 2AL on
30 April 2018.
A copy of the CVA Proposal Document, following expected
publication later today, will be available for inspection at the
registered office of the Company at Purfleet Bypass, Purfleet,
Essex, RM19 1TT during normal business hours on any business day
with effect from today and up to and including the conclusion of
the CVA Meetings.
In addition, the CVA Proposal Document will be submitted to and
made available on the National Storage Mechanism (which can be
accessed at www.morningstar.co.uk/uk/nsm).
Trading update
Since the Company last updated the market on 1 March 2018,
trading conditions have remained difficult. However, in-line with
the announcement on 1 March 2018, the Group still expects to report
a small underlying pre-tax loss for the year ending 28 April 2018
("FY18"). The Company now expects to provide the market with a
scheduled trading update for FY18 on or shortly after 30 April
2018, being the day on which the shareholder meetings are due to
take place.
Ratification of technical breach of borrowing limit
A technical issue has arisen in respect of the powers conferred
upon the directors of Carpetright by its articles of association
(the "Articles") to incur borrowings on behalf of the Company. The
Company's Articles contain a borrowing restriction which requires
the directors to restrict the borrowings of the Group to two times
its adjusted capital and reserves. Whilst carrying out a review of
this provision in the context of the CVA, the Directors have become
aware that the Group's borrowings are, and have for some time been,
technically in excess of this restriction.
This matter can be remedied by shareholders passing a resolution
to ratify this technical breach and therefore the Company has today
sent a circular to shareholders convening a general meeting on 30
April 2018 to approve such ratification and an amendment to the
articles of association to remove this restriction on borrowings.
Until this matter is resolved by the passing of these shareholder
resolutions, the Company will be unable to incur additional
borrowings that it might require to fund the short term working
capital requirements of the Group. The Company's lending banks have
agreed to relax certain covenants and other terms related to its
borrowings in order to address the short term funding shortfall
that could otherwise arise. The Directors currently believe that
the Group has sufficient working capital available to satisfy its
funding requirements up to the date when the matter will be put to
a shareholder vote (being 30 April 2018).
Enquiries:
Carpetright plc
Wilf Walsh, Chief Executive
Neil Page, Chief Financial
Officer 01708 802000
Peel Hunt LLP (Sponsor and
joint broker)
Dan Webster
George Sellar
Nicole McDougall 020 7418 8900
Deutsche Bank AG (Joint broker)
Simon Hollingsworth
Adam Miller 020 7545 8000
Citigate Dewe Rogerson (Financial
PR)
Kevin Smith
Nick Hayns 020 7638 9571
Deloitte LLP
Will Black, PR Manager 0207 007 8242
British Property Federation 020 7802 0113
Drew McNeill, PR Manager dmcneill@bpf.org.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCEASLAFSDPEEF
(END) Dow Jones Newswires
April 12, 2018 02:20 ET (06:20 GMT)
Carpetright (LSE:CPR)
Historical Stock Chart
From Aug 2024 to Sep 2024
Carpetright (LSE:CPR)
Historical Stock Chart
From Sep 2023 to Sep 2024