TIDMCPR
RNS Number : 5347O
Carpetright PLC
18 May 2018
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR
RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY
OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA,
JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR INTO ANY OTHER
JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OR BREACH
OF ANY APPLICABLE LAW. PLEASE SEE THE IMPORTANT NOTICE AT THE OF
THIS ANNOUNCEMENT.
THIS ANNOUNCEMENT, WHICH DOES NOT CONSTITUTE A PROSPECTUS OR
PROSPECTUS EQUIVALENT DOCUMENT, IS NOT AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES, AND NEITHER THIS
ANNOUNCEMENT NOR ANYTHING HEREIN FORMS THE BASIS FOR ANY CONTRACT
OR COMMITMENT WHATSOEVER.
This announcement contains inside information as defined in EU
Regulation No. 596/2014 and is in accordance with the Company's
obligations under Article 17 of that Regulation.
LEI: 213800GO32BSNNHXID90
Carpetright plc
("Carpetright" or the "Company" or the "Group")
Placing and Open Offer of 232,463,221 New Ordinary Shares
The Board of Carpetright is pleased to announce a fully
underwritten proposed share issue to raise net proceeds of
approximately GBP60.0 million (GBP65.1 million gross) through the
issue of 232,463,221 New Ordinary Shares by way of a Placing and
Open Offer at a price of 28 pence per New Ordinary Share.
The Issue Price represents a discount of 15.8 per cent. to the
Closing Price of 33.25 pence per Ordinary Share on 17 May 2018.
Carpetright will shortly send Shareholders a Prospectus in
connection with the Placing and Open Offer. The Prospectus will
contain a notice of a general meeting, to be held at 4 p.m. on 6
June 2018, to approve certain Resolutions necessary to implement
the proposed Placing and Open Offer.
This summary should be read in conjunction with the full text of
the announcement.
Summary
-- Issue of 232,463,221 New Ordinary Shares pursuant
to a Placing and Open Offer to raise net proceeds
of approximately GBP60.0 million.
-- The New Ordinary Shares have been conditionally
placed with Conditional Placees, subject to clawback
in respect of valid applications by Qualifying Shareholders
under the Open Offer.
-- Qualifying Shareholders are being offered the opportunity
to participate in the Open Offer on the basis of
88 New Ordinary Shares for every 27 Existing Ordinary
Shares.
-- The GBP60.0 million net proceeds of the Placing
and Open Offer will be utilised approximately as
follows: o GBP6.0 million to cover the additional
anticipated costs associated with implementing
the CVA;
o GBP12.5 million for the repayment of
the principal amount of the short term
unsecured loan from Meditor entered
into on 21 March 2018;
o GBP33.0 million to fund the Group's
capital expenditure plans as set out
in the Revised Business Plan; and
o The remainder to fund the Company's
ongoing working capital requirements.
-- The Placing and Open Offer is conditional on, amongst
other things, the passing of the Resolutions at
the General Meeting and there being no challenge
to the CVA during the CVA Challenge Period (unless
withdrawn or dismissed by the Court by no later
than 5 June 2018 (or such later date as the Company's
Lenders may agree)).
-- If the Resolutions are passed and the other conditions
to the Placing and Open Offer are satisfied, it
is expected that dealings in the New Ordinary Shares
will commence at 8.00 a.m. on 8 June 2018.
Wilf Walsh, CEO of Carpetright said:
"We are delighted to have received such strong support from our
shareholders and other investors in achieving this fully
underwritten fundraise. The GBP60m proceeds from the Placing and
Open Offer will give us the resources we need to complete our
restructuring and accelerate our recovery plan. As well as funding
implementation of the CVA to create a right-sized estate of stores
on sustainable rents, it will provide the necessary capital to
refurbish and modernise the ongoing store estate and to upgrade our
digital platform - both vital investments in our future. We believe
that a recapitalised market leader will ultimately be better for
customers, suppliers, landlords and shareholders."
Terms used in this announcement and not defined in Appendix I to
this announcement shall have the meaning which will be given to
them in the Prospectus.
Further details of the Placing and Open Offer are set out in
this announcement. The times set out in the expected timetable of
principal events below and mentioned throughout this announcement
are times in London unless otherwise stated.
Expected timetable:
Record Date for entitlements under the close of business
Open Offer on
16 May 2018
Publication and posting of the Prospectus 18 May 2018
and Application Forms (to Qualifying Non-CREST
Shareholders only)(1)
--------------------
Ex-entitlement date for the Open Offer 18 May 2018
--------------------
Expiry of CVA Challenge Period 11.59 p.m.
on 28 May 2018
--------------------
Latest time and date for receipt of completed 11.00 a.m. on 5
Application Forms and payment in full June 2018
under the Open Offer or settlement of
relevant CREST instructions (as appropriate)
--------------------
Results of Open Offer to be announced by 8.00 a.m. on
through a Regulatory Information Service 6 June 2018
--------------------
General Meeting 4.00 p.m. on 6 June
2018
--------------------
Announcement of the results of the General 6 June 2018
Meeting
--------------------
Admission and commencement of dealings 8.00 a.m. on 8 June
in the New Ordinary Shares on the London 2018
Stock Exchange
--------------------
(1) Subject to certain restrictions relating to Overseas
Shareholders.
Enquiries:
Carpetright plc
Wilf Walsh, Chief Executive
Neil Page, Chief Financial Officer 01708 802000
Peel Hunt LLP (Sponsor, joint bookrunner
and joint broker)
Dan Webster
George Sellar
Nicole McDougall 020 7418 8900
Deutsche Bank AG (Joint bookrunner and
joint broker)
Simon Hollingsworth
Mark Hankinson
Adam Miller 020 7545 8000
Citigate Dewe Rogerson (Financial PR)
Kevin Smith
Nick Hayns 020 7638 9571
Notes to Editors
Carpetright plc is Europe's leading specialist floorcoverings
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).
IMPORTANT NOTICE
This announcement is an advertisement and does not constitute a
prospectus or prospectus equivalent document. Nothing in this
announcement should be interpreted as a term or condition of the
Placing and Open Offer. Investors should not subscribe for or
purchase any New Ordinary Shares except on the basis of the
information which will be contained in the Prospectus expected to
be published shortly after the release of this announcement or
otherwise incorporated by reference into the Prospectus. The
Prospectus, when published, will be made available on the Company's
website (www.carpetright.plc.uk) and be available for inspection
during normal business hours on any day (except Saturdays, Sundays
and bank holidays in England and Wales) free of charge at the
offices of Travers Smith LLP, 10 Snow Hill, London EC1A 2AL, from
the date of this announcement to the date one month from the date
of Admission of the New Ordinary Shares.
This announcement does not constitute or form part of any offer
or invitation to purchase, or otherwise acquire, subscribe for,
sell, otherwise dispose of or issue, or any solicitation of any
offer to sell, otherwise dispose of, issue, purchase, otherwise
acquire or subscribe for, any security in the capital of the
Company in any jurisdiction.
The information contained in this announcement is not for
release, publication or distribution to persons in the United
States, Australia, Canada, Japan or the Republic of South Africa or
in any jurisdiction where to do so would breach any applicable law.
The New Ordinary Shares have not been and will not be registered
under the securities laws of such jurisdictions and may not be
offered, sold, taken up, exercised, resold, renounced, transferred
or delivered, directly or indirectly, within such jurisdictions
except pursuant to an exemption from and in compliance with any
applicable securities laws. No public offer of the New Ordinary
Shares is being made by virtue of this announcement in or into the
United States, Australia, Canada, Japan or the Republic of South
Africa or any other jurisdiction outside the United Kingdom in
which such offer would be unlawful. No action has been or will be
taken by the Company, the Directors, Peel Hunt LLP, Deutsche Bank
or any other person to permit a public offering or distribution of
this announcement or any other offering or publicity materials or
the New Ordinary Shares in any jurisdiction where action for that
purpose may be required, other than in the United Kingdom.
THIS ANNOUNCEMENT DOES NOT CONTAIN OR CONSTITUTE AN OFFER OF
SECURITIES FOR SALE OR THE SOLICITATION OF AN OFFER TO PURCHASE
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 AMED (THE "US SECURITIES ACT"), OR WITH ANY
SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION
OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, RESOLD,
TRANSFERRED OR DELIVERED WITHIN THE UNITED STATES EXCEPT PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE US SECURITIES ACT AND IN
COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION OF THE UNITED STATES. THERE WILL BE NO PUBLIC
OFFER OF SECURITIES IN THE UNITED STATES.
This announcement has been issued by, and is the sole
responsibility of, the Company.
Peel Hunt LLP ("Peel Hunt"), has been appointed as sponsor and
joint bookrunner to the Company. Peel Hunt is authorised and
regulated in the United Kingdom by the FCA in respect of regulated
activities and is acting exclusively for the Company and no one
else in connection with the transactions and arrangements described
in this announcement and the Prospectus. Peel Hunt will not regard
any other person (whether or not a recipient of this announcement)
as a client in relation to the transactions and arrangements
described in this announcement and the Prospectus and will not be
responsible for providing the protections afforded to Peel Hunt's
clients nor for giving advice in relation to the contents of this
announcement or the Prospectus or the transactions and arrangements
described in this announcement or the Prospectus. Peel Hunt is not
responsible for the contents of this announcement or the
Prospectus.
Deutsche Bank AG, London Branch ("Deutsche Bank") has been
appointed joint bookrunner to the Company. 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
transactions and arrangements described in this announcement and
the Prospectus. Deutsche Bank will not regard any other person
(whether or not a recipient of this announcement) as a client in
relation to the transactions and arrangements described in this
announcement and the Prospectus and will not be responsible for
providing the protections afforded to Deutsche Bank's clients nor
for giving advice in relation to the contents of this announcement
or the Prospectus or the transactions and arrangements described in
this announcement or the Prospectus. Deutsche Bank is not
responsible for the contents of this announcement or the
Prospectus.
This announcement has been prepared for the purposes of
complying with the applicable laws and regulations of the United
Kingdom and the information disclosed may not be the same as that
which would have been disclosed if this announcement had been
prepared in accordance with the laws and regulations of any
jurisdiction outside of the United Kingdom.
Note regarding forward-looking statements:
This announcement includes statements that are, or may be deemed
to be, forward-looking statements. These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms anticipates, believes, estimates, expects,
intends, may, plans, projects, should or will, or, in each case,
their negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or
intentions. These forward-looking statements include all matters
that are not historical facts. They appear in a number of places
throughout this announcement and include, but are not limited to,
statements regarding the Company's and/or Directors' intentions,
beliefs or current expectations concerning, amongst other things,
the Group's results of operations, financial position, prospects,
growth, strategies and expectations for the floorcoverings and beds
market.
Any forward-looking statements in this announcement reflect the
Company's current view with respect to future events and are
subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Group's operations,
results of operations and growth strategy. Investors should
specifically consider the factors identified in this announcement
which could cause actual results to differ before making an
investment decision. Subject to the requirements of the Prospectus
Rules, the Disclosure Requirements, the Transparency Rules and the
Listing Rules, none of the Company, the Directors, Peel Hunt,
Deutsche Bank and PWC undertakes any obligation publicly to release
the result of any revisions to any forward-looking statements in
this announcement that may occur due to any change in the Company's
expectations or to reflect events or circumstances after the date
of this announcement. Past performance of the Company is not
necessarily indicative of future performance.
You are advised to read this announcement and, once available,
the Prospectus and the information incorporated by reference
therein, in their entirety for a further discussion of the factors
that could affect the Company's or the Group's future performance,
and the industries in which they operate. In light of these risks,
uncertainties and assumptions, the events described in the
forward-looking statements in this announcement may not occur.
Neither the content of the Company's website (or any other
website) nor any website accessible by hyperlinks on the Company's
website (or any other website) is incorporated in, or forms part
of, this announcement.
Any person receiving this announcement is advised to exercise
caution in relation to the Placing and Open Offer. If in any doubt
about any of the contents of this announcement, independent
professional advice should be obtained.
This summary should be read in conjunction with the full text of
the announcement which follows.
Carpetright plc
("Carpetright" or the "Company" or the "Group")
Placing and Open Offer of 232,463,221 New Ordinary Shares
1. Introduction
On 12 April 2018, the Company announced that it proposed to
implement a CVA between the Company and its creditors, pursuant to
the terms set out in the CVA Proposal, with the principal objective
to rationalise the Company's leasehold obligations in order to
restore the viability of the Company's business. At the same time,
it announced its intention, subject to and following the approval
of the CVA by the Company's creditors and Shareholders, to raise
net proceeds of not less than GBP60 million through a proposed
equity fundraising.
Further to that announcement the Company announced on 11 May
2018 that it had obtained interim funding of GBP15.0 million (net)
from the Meditor Loan Note to assist with its short term working
capital requirements until it receives the net proceeds from the
proposed equity fundraising, and that it had agreed the Post-CVA
RCF Amendments (which are detailed further in paragraph 6 of this
announcement) which are conditional upon, amongst other things, (i)
the CVA not being subject, during the CVA Challenge Period, to a
challenge which is not withdrawn or dismissed by the Court by no
later than 5 June 2018 (or such later date, on or prior to the CVA
Challenge Long Stop Date, as the Company's Lenders may agree); and
(ii) receipt of the Placing and Open Offer net proceeds.
This announcement sets out the terms of the proposed equity
fundraising to raise approximately GBP60.0 million net proceeds by
way of a Placing and Open Offer of 232,463,221 New Ordinary Shares
at an Issue Price of 28 pence per New Ordinary Share. The net
proceeds of the Placing and Open Offer will be utilised to cover
the additional anticipated costs associated with the CVA, repay the
principal amount of the Meditor Facility, fund the Group's capital
expenditure plans as set out in the Revised Business Plan and fund
its ongoing working capital requirements. The Placing and Open
Offer will only proceed if the proposed CVA is not subject to a
challenge that is not withdrawn or dismissed by the Court by no
later than 5 June 2018 (or such later date, on or prior to the CVA
Challenge Long Stop Date, as the Lenders may agree)).
The Placing and Open Offer requires Shareholder approval: (i) of
the terms of the Placing and Open Offer and to direct the Directors
to implement the Placing and Open Offer; (ii) to grant the
Directors authority to allot and issue the New Ordinary Shares; and
(iii) to allot the New Ordinary Shares at the Issue Price, which
represents a discount to the Closing Price of more than 10 per
cent; and (iv) to allot and issue New Ordinary Shares to certain
related parties in connection with the Placing and Open Offer.
Approval of the Resolutions will be sought at a General Meeting to
be held at 4 p.m. on 6 June 2018 at the of ces of Travers Smith
LLP, 10 Snow Hill, London, EC1A 2AL.
This announcement sets out the background to and explains the
reasons for the Placing and Open Offer, including why the Directors
believe it is in the best interests of the Group and Shareholders
as a whole and to recommend that Shareholders vote in favour of the
Resolutions.
In the event that the Resolutions are not passed, the Placing
and Open Offer will not proceed. If the Placing and Open Offer does
not proceed, the Company will be in default under the RCF
immediately following the General Meeting and the CVA will be
terminated. Under such circumstances, the Group will be unable to
continue trading as a going concern which will likely result in the
appointment of administrators or liquidators, as further described
in paragraph 15 of this announcement.
2. Conditions to the Placing and Open Offer
The Placing Agreement (and therefore the Placing and Open Offer)
is conditional upon, among other things:
-- Admission becoming effective by not later than 8.00
a.m. on 8 June 2018 (or such later time and/or date
as the Company and the Joint Bookrunners may agree,
being not later than 29 June 2018);
-- the approval of the Resolutions (without amendment)
by Shareholders at the General Meeting;
-- there being no challenge to the CVA during the Challenge
Period or, to the extent there is any such challenge
during the Challenge Period, such challenge being
withdrawn or dismissed by the Court by no later
than 5 June 2018 (or such later date, on or prior
to the CVA Challenge Long Stop Date, as the Lenders
may agree); and
-- each condition to enable the CVA to be implemented
(other than Admission and the receipt of the net
proceeds of the Placing and Open Offer) being satisfied
on or before Admission.
3. Background to the Placing and Open Offer
The core historical challenge to the Company's pro tability and
nancial performance has been the size of its real estate portfolio.
This has been a legacy issue for the Company resulting primarily
from the aggressive store opening strategy pursued by its previous
leadership, which has left the Company burdened with an oversized
real estate portfolio consisting of too many sites on long leases
with unsustainable rents. As at 16 May 2018 (being the latest
practicable date prior to the publication of this announcement),
the Company's UK real estate portfolio consisted of 410 operational
stores, 15 non-operational stores and 20 warehouses, of which 205
(including: 194 operational stores; 10 non-operational stores; and
1 warehouse) have been identi ed as part of the CVA as
underperforming (loss-making or broadly breakeven), and/or on
unfavourable lease terms, or, in certain cases, not expected to
have signi cant strategic value to the Company going forward. Many
of these poor performing sites still have long leases to run on
unfavourable terms, which has limited the Company's ability to
effectively address the size of its real estate portfolio and exit
a meaningful number of underperforming properties in the
short-to-medium term despite having offered signi cant nancial
incentives to landlords in order to do so. Despite this, the
Company has to date been able to make some progress in reducing the
size of its real estate portfolio and improving lease terms by
securing lower rents or exiting underperforming sites at lease
renewal dates. As at 16 May 2018 (being the latest practicable date
prior to the publication of this announcement), the Company has
achieved a net reduction of 61 operational stores in its UK real
estate portfolio from 471 as at July 2014.
Over the previous 24 months, additional macroeconomic and
competitive challenges have emerged which have exacerbated the
effects of the Company's oversized real estate portfolio and
negatively impacted the Company's pro tability and nancial
condition. Firstly, the UK's decision to exit the European Union on
23 June 2016 resulted in a dramatic depreciation of sterling
against the euro that had the effect of increasing the cost of
goods from the Company's European suppliers, requiring the Company
to raise prices in order to mitigate the adverse effects on its pro
tability and negatively impacting its UK sales in the rst half of
the 2017 nancial year. Since the vote to exit the European Union in
2016, UK disposable incomes and consumer con dence have declined,
which has had a negative impact on UK consumer spending.
Concurrently, the competitive environment in the UK oorcoverings
market intensi ed signi cantly over this period with a new national
competitor entering the market with a widespread and aggressive
store opening programme that has put signi cant pressure on the
Group's best performing stores. In response to the changing
competitive landscape, the Company has implemented, and continues
to implement, a strategy focused on improving its brand image by
(i) strategically refurbishing its stores (prioritising those most
threatened by new competition); and (ii) offering enhanced local
promotions (such as free tting services) in the local areas
impacted most by the new competitive pressure. The Company believes
this strategy has been effective where it has been applied, as
evidenced by those sites where such measures have been in effect
for more than 12 months performing ahead of the rest of the
Company's estate.
Despite the steps the Company has taken to address these
challenges, it experienced a signi cant deterioration in UK trading
in the second half of the 2018 nancial year, most notably in the
post-Christmas trading period. On 19 January 2018, the Company
issued a trading update revising down its full year pro t guidance
based on a decline in UK trading with like-for-like sales
decreasing by 3.6 per cent. in the 11 weeks to 13 January 2018, re
ecting a poor post-Christmas trading period. Subsequently, the
Company issued a further trading update on 1 March 2018, stating
that, despite showing some improvement since 13 January 2018,
like-for-like sales remained below management's expectations and
that the Company expected to report a small underlying pre-tax loss
for the nancial year ending 28 April 2018. As a result of this
deterioration in the Company's nancial position, the Company also
noted that it was proactively engaged in constructive discussions
with the Lenders to ensure its continued compliance with the terms
of the Company's facilities with the Lenders.
While the Board is con dent that its brand investment and store
refurbishment strategies have been, and will continue to be,
successful in enabling the Company to respond to increased
competition and a challenging macroeconomic environment, the Board
has also examined the feasibility of a range of options, including
disposals of assets and additional sources of funding, intended to
stabilise its nancial position and rationalise its real estate
portfolio. However, in the Board's opinion none of these options
alone would be suf cient to overcome the challenge posed by its
legacy real estate portfolio, in light of the current trading
environment, while improving its nancial headroom and liquidity
position.
Therefore, the Company announced on 21 March 2018 that it was
exploring the feasibility of the CVA. The Company further announced
that it had agreed the GBP12.5 million Meditor Facility to assist
with its short term working capital requirements and that following
the CVA it intended to raise additional funds of between GBP40
million and GBP60 million through an equity fundraising.
Following that announcement, the Company published the CVA
Proposal including the full terms of the CVA on 12 April 2018 and
also announced that its additional equity funding requirement would
be not less than GBP60 million.
The CVA was approved by the requisite majority of the Company's
creditors on 26 April 2018 and the requisite majority of
Shareholders on 30 April 2018. However, the continued effect of the
CVA remains effectively conditional upon (i) the Company receiving
the net proceeds of the Placing and Open Offer, and (ii) the CVA
not being subject, during the CVA Challenge Period, to a challenge
which is not withdrawn or dismissed by the Court by no later than 5
June 2018 (or such later date, on or prior to the CVA Challenge
Long Stop Date, as the Lenders may agree). In addition, the Company
published a trading update on 30 April 2018 in which it announced
that the Group anticipates reporting an underlying pre-tax loss for
the year ended 28 April 2018 in the region of GBP7 million to GBP9
million.
On 11 May 2018, the Company announced that it had obtained
additional interim funding of GBP15 million (net) from the Meditor
Loan Note to assist with its short term working capital
requirements until it receives the net proceeds from the Placing
and Open Offer.
The Lenders have con rmed their support for the Company in order
that the Company can implement the CVA and launch the Placing and
Open Offer and have agreed the Pre-CVA RCF Amendments and Pre-CVA
RCF Waivers with the Company prior to the CVA being announced. The
Lenders have also agreed the Post-CVA RCF Amendments (which are
detailed further in paragraph 6 of this announcement) which are
conditional upon, amongst other things, (i) the CVA not being
subject, during the CVA Challenge Period, to a challenge which is
not withdrawn or dismissed by the Court by no later than 5 June
2018 (or such later date, on or prior to the CVA Challenge Long
Stop Date, as the Lenders may agree); and (ii) receipt of the
Placing and Open Offer net proceeds.
4. Revised Business Plan
Following the receipt of the net proceeds from the Placing and
Open Offer, the Company intends to implement a revised business
plan (the "Revised Business Plan"). The Revised Business Plan will
continue to focus on the four key elements of the Company's
existing business strategy consisting of: (i) 'Who we are' -
updating the Group's brand image and customer perception, through
modernising the stores estate and investing in its people; (ii)
'What we sell' - matching the Group's extensive range of
oorcovering products to market trends and composition; (iii) 'How
we sell' - delivering high quality customer service and an
attractive customer proposition; and (iv) 'Where we sell' -
providing an ef cient multi-channel sales platform with a
right-sized real estate portfolio. The Revised Business Plan
represents a continuation and acceleration of the implementation of
the Company's existing strategy.
The Group has allocated GBP6.0 million from the net proceeds of
the Placing and Open Offer to fund the implementation of the CVA,
including associated costs related to redundancy, staff retention,
a compromised landlord fund, contract terminations and store
closures, and GBP33.0 million to fund its capital expenditure plans
forming part of its Revised Business Plan.
Right-sizing the Group's UK store portfolio
One of the core historical challenges to the Company's pro
tability and nancial performance has been the size of its UK store
portfolio, which has consisted of too many sites on long leases
with unsustainable rents. The Company has sought to address this
challenge since 2014 and, as at 16 May 2018, the Company has
achieved a net reduction of 176 operational stores in its UK store
portfolio from 586 stores as at May 2010. As at 16 May 2018 (being
the latest practicable date prior to the publication of this
announcement), the Group was trading from 410 operational stores in
the UK, of which 194 have been identi ed as underperforming
(loss-making or broadly breakeven), and/or on unfavourable lease
terms, or, in certain cases, not expected to have signi cant
strategic value to the Company going forward.
Implementation of the CVA will result in the Group exiting
leases for 92 sites (including 81 operational stores), and the
Company is expected to incur additional costs of approximately
GBP6.0 million in connection with exiting these sites with such
costs to be funded from the net proceeds of the Placing and Open
Offer. In addition to the stores being exited, an additional 113 UK
sites will be subject to rent reductions and revised lease terms
under the terms of the CVA, which the Group expects to result in
annualised cash savings over a three year period of GBP5.0 million
(on an accounting basis, such savings will be phased in over the
life of each relevant lease). For these sites, the CVA will also
allow the Group greater exibility for exiting such premises by
giving it the ability to terminate such leases on three months'
notice to the landlord with such notice period to expire (i) on the
second or third anniversary following 26 April 2018 (in the case of
the 82 Category B1 Premises) or (ii) on a date on or after 18
months following 26 April 2018 (in the case of the 31 Category B2
Premises). The Group intends to continue making strategic decisions
in relation to the size of its UK and Rest of Europe store
portfolio as part of its existing business strategy, and the
implementation of the CVA will give it additional exibility to do
so with respect to the Category B Premises in the UK.
The annualised rental, business rates and employee cost savings
associated with the closure of the Category C Premises as part of
the CVA are expected to be GBP33.0 million, partially offset by a
loss in gross pro t from a reduction in sales from such stores of
GBP30.0 million. Assuming a transfer of 20 per cent. of the
revenues from the closed stores into the rest of the Group's store
portfolio nationally (which would result in a net pro t of GBP6.0
million, annualised cash savings for the Category B Premises over a
three year period of GBP5.0 million and a reduction in the Group's
annual central infrastructure costs of GBP8.0 million), the
annualised cash savings to the Group as a result of the
implementation of the CVA is expected to be approximately GBP19.0
million, factoring in a GBP3.0 million contingency for execution
risk. This bene t is only potentially achievable following
implementation of the CVA and stable UK trading conditions. The
Company will also continue to bear additional costs associated with
servicing indebtedness incurred in connection with implementing the
Restructuring Plan.
Refurbishing and modernising the remaining store estate
The Group invested GBP10.8 million in store refurbishments and
modernisations for the 43 weeks ended 24 February 2018 ( nancial
year ended 29 April 2017: GBP12.7 million). Since 1 May 2016, 183
stores in the UK and 31 stores in the Netherlands and Belgium have
received some level of refurbishment and modernisation investment.
The level of improvements varies by store with some stores
receiving a complete interior and exterior upgrade and others only
being re-faced with the Group's updated branding. During the last
three nancial years a signi cant portion of the investment in the
refurbishment and modernisation programme for UK stores was
defensive in nature, with a priority given for refurbishment to key
stores in areas facing new competitive pressure. The Directors
believe refurbished stores have positively contributed to the
Group's revenue and nancial performance as evidenced by newly
refurbished stores in the UK that have been unaffected by new
competition and trading for 12 months following completion of
refurbishment works generating like-for-like sales growth 9
percentage points higher than the stores in the UK that have not
received refurbishment upgrades for the 52 weeks ended 28 April
2018.
Following the receipt of the net proceeds of the Placing and
Open Offer, the Group expects to be able to accelerate its
refurbishment and modernisation programme across its smaller,
right-sized store portfolio. While it intends to deploy similar
amounts of capital expenditure on a per store basis to that which
it had expended in previous periods, the Group will be able to
accelerate the re-branding of its entire UK store portfolio,
instead of focusing primarily on defensive or targeted store
refurbishments and modernisations. The Group expects that it will
be able to complete the re-facing of all of its UK stores with the
current branding within 24 months following the receipt of the net
proceeds from the Placing and Open Offer (with some UK stores
receiving more extensive refurbishment upgrades). The Group will
also continue to progress the planned refurbishment of its stores
in the Netherlands and Belgium consistent with its existing
business strategy. The Group has planned capital expenditure of
GBP14.2 million for store refurbishments over the next three
nancial years to April 2021, which will be funded by the net
proceeds of the Placing and Open Offer.
Digital investment
As part of its existing business strategy, the Group has
invested, and will continue to invest, in upgrading its digital
platform through upgrades to its background systems and consumer
facing websites. The Group is currently in the process of
transforming its legacy IT systems by moving its UK and Republic of
Ireland business onto a new Microsoft Dynamics 365 platform, which
is expected to be completed in April 2019. The Directors expect
this will lead to improvements in sales conversion and customer
relationship management. The Group invested GBP3.7 million on IT
related capital expenditure in the 43 weeks ended 24 February 2018
( nancial year ended 29 April 2017: GBP1.7 million). As part of the
Revised Business Plan, the Group intends to invest GBP7.8 million
on digital re-platforming and IT systems upgrades over the next
three nancial years to April 2021.
Re-phasing of marketing spend
As part of the Revised Business Plan, the Group will refocus its
UK marketing and advertising on promoting its brand image with
consumers to counteract publicity surrounding the Restructuring
Plan and potential negative perceptions associated with it. While
the total expenditure on marketing and advertising in the UK is
intended to remain consistent with previous periods, it will be
re-phased with increased marketing and advertising by the Group
following the summer period and the closure of stores as part of
the CVA.
Increasing emphasis on hard ooring
The Group's existing business strategy includes a signi cant
expansion of its product offering in the hard ooring segment to
better re ect evolving consumer preferences, and the Group is
targeting annualised like-for-like sales growth for hard ooring
products of 14 per cent. over the next three nancial years. In the
UK, this involves increasing the range of hard ooring products
being offered and the in-store merchandising of those products and
implementing a marketing strategy focused on improving consumer
awareness of the Group as a retailer of hard ooring products. The
Directors believe that the rationalising of the UK store portfolio
a part of the CVA will improve and accelerate its ability to
execute this element of its strategy in its UK stores and that the
refocus of its marketing as part of the Revised Business Plan will
give it the opportunity to increase its brand awareness in the hard
ooring segment.
5. Impact of the CVA Proposal
The terms of the CVA were set out in the CVA Proposal published
on 12 April 2018, and the principal objective of the CVA is to
rationalise the Company's leasehold obligations in order to restore
the viability of the Company's business. As set out in the CVA
Proposal, the main objectives of the CVA are:
-- to enable the exit, on or after 23 September 2018,
of the 92 Category C Premises which have been determined
by the Company, in conjunction with its advisors,
to no longer be viable prospects for the Company,
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);
-- to vary the terms of the leases of the Category
B Premises, which have been determined by the Company,
in conjunction with its advisors, to be viable
prospects if an appropriate reduction in rent can
be obtained, so that the 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 (if this is not already the case). The Category
B Premises have been split into two sub-categories,
being Category B1 Premises and Category B2 Premises
based on the rent reduction determined by the Company,
in conjunction with its advisors, as necessary
to restore the viability of the relevant Category
B Leases. The applicable rent reductions for the
two sub-categories that will be in effect until
the earlier of the expiration of the relevant lease
or 23 June 2021 (or, if later, such other date
as falls 3 years after the day before the Next
Payment Date for the relevant lease) is as follows: i. 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
ii. 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);
-- to temporarily vary the terms of the 195 Category
A Premises which have been determined by the Company,
in conjunction with its advisors, to be sites that
are performing adequately and/or sites that are
otherwise core to the Company's future business
and pro tability, 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 (if this is not already
the case);
-- to compromise the claims of the Compromised Contingent
Property Creditors for the payment of GBP1; and
-- to provide for an additional payment to the Compromised
Landlords from the Compromised Lease Fund.
The CVA will continue until the CVA Supervisors are satis ed
that the terms of the CVA have been fully implemented. While it is
not possible to state with any certainty the proposed duration of
the CVA, it is expected that the CVA will complete on or around 23
September 2021 or otherwise as soon as is reasonably
practicable.
6. Key terms of the RCF Amendments and other borrowings
The RCF is a GBP45 million revolving credit facility with a
maturity date of 31 July 2019. As at 16 May 2018, the amount
outstanding under the RCF was GBP45 million. The RCF requires the
Company to comply with certain nancial covenants and nancial
information covenants. The RCF also contains several events of
default, including events relating to failure to pay, breach of
certain undertakings, breach of certain nancial covenants,
insolvency and insolvency proceedings.
Pursuant to an overdraft facility letter dated 29 April 2015 (as
amended from time to time) RBS acting as agent for National
Westminster Bank plc has made a GBP7,500,000 uncommitted overdraft
facility available to the Company (the "Natwest Overdraft
Facility"). As at 16 May 2018, the amount outstanding under the
facility was GBP2,000,639.88, and the facility is repayable on
demand by RBS. The Natwest Overdraft Facility will be committed
when the Post-CVA RCF Amendments become effective.
Pursuant to an overdraft facility letter dated 4 December 2015
(as amended or replaced from time to time) Ulster Bank Ireland DAC
("Ulster Bank") has made a EUR2,400,000 uncommitted overdraft
facility available to the Company (the "Ulster Bank Overdraft
Facility"). As at 16 May 2018, the amount outstanding under the
facility was EUR1,784,012.28, and the facility is repayable on
demand by Ulster Bank. The Ulster Bank Overdraft Facility will be
committed when the Post-CVA RCF Amendments become effective.
The Company and certain of its subsidiaries have entered into
guarantees in respect of each other's obligations under the RCF and
the overdraft facilities from RBS and Ulster Bank and have granted
security to secure these obligations.
Pursuant to the Meditor Facility, Meditor has made a GBP12.5
million term loan to the Company. That facility contains several
events of default, including events relating to failure to pay,
breach of certain undertakings, insolvency and insolvency
proceedings and events of default triggered if the key milestones
in relation to the CVA are not met within certain agreed
timeframes. The Company and certain of its subsidiaries have
entered into unsecured guarantees in respect of each other's
obligations under the Meditor Facility.
Pursuant to a consent, waiver and amendment agreement dated 12
April 2018, the Company and the Lenders agreed various waivers
prior to announcement of the CVA, primarily being:
-- a waiver with respect to the events of default under
the RCF triggered by the CVA and the appointment
of the Nominees or the Supervisors;
-- a waiver in respect of any breach by the Company
of the nancial covenants in the RCF that were due
to be tested with respect to the testing period
ending on 30 April 2018 (these nancial covenants
will instead be tested with respect to a new testing
period ending on 26 May 2018); and
-- a waiver in respect of any failure by the Company
to comply with its clean down obligations under
the RCF for the 2018 nancial year
(together, the "Pre-CVA RCF Waivers").
As a condition of the Lenders' agreement to the Pre-CVA RCF
Waivers, the Company agreed with the Lenders to amend the terms of
the RCF to provide for, amongst other things: (i) additional
information, business planning and cash management undertakings;
(ii) an additional event of default that may be triggered if the 13
week look forward cash ow forecasts which the Company is required
to deliver under the RCF show that the Group is forecast to have
insuf cient cash to meet its working capital requirements; and
(iii) an additional event of default that may be triggered if the
key milestones in relation to the CVA process and the Placing and
Open Offer and related matters are not met within certain agreed
timeframes (subject to a 5 business day grace period). As such
there will be an event of default under the RCF (unless recti ed
during the 5 business day grace period) if, amongst other
things:
-- the CVA is subject, during the CVA Challenge Period,
to a challenge which is not withdrawn or dismissed
by the Court by no later than 29 May 2018 (or 5
June 2018 when taking account of the 5 business
day grace period);
-- the General Meeting is not held by 6 June 2018;
or
-- net proceeds of not less than GBP60 million from
the Placing and Open Offer are not received by 8
June 2018
(together, the "Pre-CVA RCF Amendments").
Separately from the Pre-CVA RCF Waivers and the Pre-CVA RCF
Amendments, the Company, as announced on 11 May 2018, has agreed
further amendments with the Lenders which will only come into
effect upon, amongst other things, (i) satisfaction of certain
customary conditions precedent; (ii) the CVA not being subject,
during the CVA Challenge Period, to a challenge which is not
withdrawn or dismissed by the Court by no later than 5 June 2018
(or such later date, on or prior to the CVA Challenge Long Stop
Date, as the Lenders may agree); and (iii) receipt of net proceeds
of not less than GBP60 million from the Placing and Open Offer.
These amendments include: (i) extending the maturity date of the
RCF to 31 December 2019; (ii) amending nancial covenant
requirements for future testing dates; and (iii) making the Natwest
Overdraft Facility and the Ulster Bank Overdraft Facility committed
(together, the "Post-CVA RCF Amendments").
In addition, the Company also announced on 11 May 2018 that it
had obtained interim funding of GBP15 million (net) from the
Meditor Loan Note. The Meditor Loan Note is unsecured, and the
Company and certain of its subsidiaries have entered into unsecured
guarantees in respect of each other's obligations under the Meditor
Loan Note.
7. Use of proceeds
The net proceeds of the Placing and Open Offer of approximately
GBP60.0 million will improve the Group's working capital position
and substantially increase the Group's cash balance. The Group will
utilise approximately GBP6.0 million of the net proceeds to cover
the anticipated additional costs associated with implementing the
CVA, GBP12.5 million for the repayment of the principal amount of
the Meditor Facility, and GBP33.0 million to fund its capital
expenditure plans as set out in its Revised Business Plan. The
remainder of the net proceeds will be used for ongoing working
capital requirements.
8. Principal terms of the Placing and Open Offer
The Company is proposing to raise approximately GBP60.0 million
(net of expenses) by way of the Placing and Open Offer of
232,463,221 New Ordinary Shares.
The Issue Price of 28 pence per New Ordinary Share, which is
payable in full on acceptance by no later than 11.00 a.m. on 5 June
2018, represents a 15.8 per cent. discount to the Closing Price of
33.25 pence per Existing Ordinary Share on 17 May 2018, the last
trading day prior to the date of this announcement.
The Joint Bookrunners have conditionally placed all the New
Ordinary Shares at the Issue Price with Conditional Placees. The
commitments of these Conditional Placees are subject to clawback in
respect of valid applications for New Ordinary Shares by Qualifying
Shareholders pursuant to the Open Offer. Subject to the Placing and
Open Offer not being terminated, any New Ordinary Shares which are
not applied for in respect of the Open Offer will be issued to
Conditional Placees procured by the Joint Bookrunners at the Issue
Price. To the extent that any Conditional Placee fails to take up
any or all of the New Ordinary Shares which have been allocated to
it or which it has agreed to take up at the Issue Price, each of
the Joint Bookrunners has agreed, on the terms and subject to the
conditions set out in the Placing Agreement, severally, and not
jointly or jointly and severally, to itself take up such New
Ordinary Shares at the Issue Price in its agreed proportion.
If a Qualifying Shareholder does not take up any of his
entitlement to New Ordinary Shares, his proportionate shareholding
will be diluted by 76.5 per cent. However, if a Qualifying
Shareholder takes up his New Ordinary Shares in full, he will,
after the Placing and Open Offer has been completed, and ignoring
any fraction of an Ordinary Share, as nearly as practicable have
the same proportionate voting rights and entitlements to dividends
as he had on the Record Date.
Subject to the ful lment of, among other things, the conditions
set out below, Carpetright will offer 232,463,221 New Ordinary
Shares to Qualifying Shareholders at the Issue Price of 28 pence
per New Ordinary Share, payable in full on acceptance. The Open
Offer will be offered on the basis of:
88 New Ordinary Shares for every 27 Existing Ordinary Shares
held by Qualifying Shareholders on the Record Date, and so in
proportion to any other number of Existing Ordinary Shares then
held. Qualifying Non- CREST Shareholders with registered addresses
in the United States or in any of the Excluded Territories will not
be sent Application Forms and Qualifying CREST Shareholders in such
territories will not have their CREST stock accounts credited with
Open Offer Entitlements, except where Carpetright and the Joint
Bookrunners are satis ed that such action would not result in the
contravention of any registration or other legal or regulatory
requirement in such jurisdiction.
Shareholders should note that the Open Offer is not a rights
issue. Qualifying CREST Shareholders should note that although the
Open Offer Entitlements will be admitted to CREST and be enabled
for settlement, applications in respect of entitlements under the
Open Offer may only be made by the Qualifying CREST Shareholder
originally entitled or by a person entitled by virtue of a bona de
market claim raised by Euroclear UK & Ireland's Claims
Processing Unit. Qualifying non-CREST Shareholders should note that
the Application Form is not a negotiable document and cannot be
traded. Qualifying CREST Shareholders should be aware that in the
Open Offer, unlike in a rights issue, any New Ordinary Shares not
applied for will not be sold in the market or placed for the bene t
of Qualifying CREST Shareholders who do not apply under the Open
Offer, but will be placed under the Placing for the bene t of the
Company.
The New Ordinary Shares will, when issued, rank pari passu in
all respects with the Existing Ordinary Shares, including the right
to receive in full all dividends and other distributions declared,
made or paid by reference to a record date after the date of their
issue.
The results of the Placing and Open Offer, including the
aggregate amount raised are expected to be announced by Carpetright
to a Regulatory Information Service by 8.00 a.m. on 6 June
2018.
Applications will be made to the FCA for the New Ordinary Shares
to be admitted to the premium listing segment of the Of cial List
and to the London Stock Exchange for the New Ordinary Shares to be
admitted to trading on its main market for listed securities. It is
expected that Admission of the New Ordinary Shares will occur at
8.00 a.m. on 8 June 2018.
The Existing Ordinary Shares are already admitted to the premium
listing segment of the Of cial List and to trading on the London
Stock Exchange's main market for listed securities and to CREST. It
is expected that all of the New Ordinary Shares, when issued, will
be capable of being held and transferred by means of CREST. The New
Ordinary Shares will trade under ISIN GB0001772945. The ISIN number
for the Open Offer Entitlements is GB00BFMHKM53.
9. Effect of the Placing and Open Offer
The New Ordinary Shares represent, in aggregate, approximately
325.9 per cent. of the Company's Existing Issued Share Capital.
Upon completion of the Placing and Open Offer, the New Ordinary
Shares will represent approximately 76.5 per cent. of the Company's
Enlarged Issued Share Capital. The Resolutions which will be set
out in the Notice of General Meeting must be passed in order for
the Placing and Open Offer to proceed.
Qualifying Shareholders who are not eligible to or do not take
up any of their entitlements in respect of the Open Offer will
experience a dilution of approximately 76.5 per cent. of their
interests in the Company as a result of the Placing and Open
Offer.
The Placing and Open Offer will result in an increase in cash
and other short term funds of approximately GBP60.0 million (net of
expenses) with a corresponding increase of approximately GBP60.0
million in net assets.
10. Related party transactions
The following Shareholders have agreed to subscribe up to the
following amounts in aggregate for New Ordinary Shares in the
Placing and Open Offer, subject to clawback to satisfy valid
applications under the Open Offer:
-- Meditor, which holds 21,388,048 Existing Ordinary Shares
(approximately 29.99 per cent. of the Company's issued
ordinary share capital), has agreed to subscribe up to
69,709,193 New Ordinary Shares (resulting in Meditor
being interested in not more than 29.99 per cent. of
the Enlarged Issued Share Capital, assuming no clawback);
-- Crescent, which holds 8,618,656 Existing Ordinary Shares
(approximately 12.08 per cent. of the Company's issued
ordinary share capital), has agreed to subscribe up to
28,090,434 New Ordinary Shares (resulting in Crescent
being interested in not more than 12.08 per cent. of
the Enlarged Issued Share Capital, assuming no clawback).
As a consequence of the current interests of each of Meditor and
Crescent in the Company, their proposed participations in the
Placing and Open Offer are related party transactions for the
purposes of Chapter 11 of the Listing Rules and each such
transaction requires the prior approval of Independent
Shareholders. Each of Meditor and Crescent is not entitled to vote,
and has undertaken to take all reasonable steps to ensure that its
associates will abstain from voting, on the relevant Resolution to
approve its own related party transaction at the General
Meeting.
Wilf Walsh, who as a Director is a related party of the Company
for the purposes of the Listing Rules, has agreed to subscribe for
428,571 New Ordinary Shares at the Issue Price for a total
consideration of approximately GBP120,000. This transaction is
disclosed in accordance with Listing Rule 11.1.10R and the Company
has received written confirmation from its Sponsor that the terms
of the transaction are fair and reasonable as far as the Company's
Shareholders are concerned.
11. Current trading and outlook
The Group last provided a trading update with respect to the
period ending on 28 April 2018 in its announcement published on 30
April 2018.
As stated in that announcement, trading conditions have remained
dif cult for the Group, as expected, in both its UK and Rest of
Europe business segments. In the UK, continued weakness in consumer
con dence, coupled with some inevitable disruption to trade arising
from the publicity associated with the implementation of the
Group's Restructuring Plan, resulted in like-for-like sales falling
by 10.5 per cent. in the nal quarter of the nancial year ended 28
April 2018. This performance, combined with that of the previous
nine months, will result in full year like-for-like sales in the UK
being down by 3.6 per cent. However, the Group's refurbished stores
in the UK continued to outperform the uninvested estate in the UK,
thereby giving the Group con dence to continue with the store
refurbishment and modernisation strategy following the receipt of
the net proceeds from the Placing and Open Offer. Like-for-like
sales in the Rest of Europe declined by 8.3 per cent. in the nal
quarter of the nancial year ended 28 April 2018 against a similar
trading background to that experienced in the UK, with the full
year gure for the Rest of Europe being an increase in like-for-like
sales of 1.1 per cent. for the nancial year ended 28 April 2018. As
a result of the above, the Group anticipates reporting an
underlying pre-tax loss for the nancial year ended 28 April 2018 in
the region of GBP7 million to GBP9 million.
In addition, the Group's consolidated income statement for the
43 weeks ended 24 February 2018 included separately reported items
of GBP59.8 million as a result of poor trading conditions. These
items include the impairment of goodwill of GBP34.7 million,
impairment of freehold property valuations of GBP5.1 million,
impairment of assets in loss making stores of GBP4.7 million and a
revision to onerous contract provisions of GBP13.3 million. Of
these, a majority of the onerous contract provisions are expected
to be reversed in the Group's consolidated income statement for the
nancial year ended 28 April 2018 as part of an adjustment to re ect
changes in property costs and lease length of onerous leases for UK
stores as a result of the implementation of the CVA.
Carpetright expects to report its nal results for the 2018
nancial year on 26 June 2018.
The Company expects that trading conditions will continue to be
challenging for the rst half of the current nancial year, in the UK
in particular, due to publicity surrounding the Restructuring Plan
and potential negative perceptions associated with it and with low
UK consumer con dence levels continuing to create a challenging
economic environment for the Group and the UK retail sector
generally. Despite the challenging trading environment and costs
associated with implementing the Restructuring Plan, the Group
expects the rationalisation of its UK store estate as part of the
CVA to deliver annualised cash savings of approximately GBP19.0
million over the medium term. It will also, however, continue to
bear additional costs associated with servicing indebtedness
incurred in connection with implementing the Restructuring
Plan.
12. Dividend policy
The Board took the decision to prioritise the use of cash for
the acceleration of the Group's business strategy and not pay a nal
dividend for the nancial year ended 29 April 2017 or an interim
dividend for the 26 weeks ended 28 October 2017. Based on the
Group's current outlook and the restrictions on payment of
dividends under the RCF Amendments and the Meditor Loan Note, the
Directors do not expect this position to change prior to the
maturity of the RCF on 31 December 2019 and the maturity of the
Meditor Loan Note on 31 July 2020. However, there is an intention
to return to paying a dividend when the Company has suf cient
distributable reserves and the Directors believe it is nancially
prudent to do so.
13. General Meeting
A notice convening a General Meeting to be held at the of ces of
Travers Smith LLP, 10 Snow Hill, London EC1A 2AL at 4.00 p.m. on 6
June 2018 will be set out at the end of the Prospectus. The purpose
of the General Meeting will be to consider, and if thought t, pass
the Resolutions, to enable the Company to proceed with the Placing
and Open Offer.
The Resolutions propose that Shareholders approve: (i) the terms
of the Placing and Open Offer and direct the Directors to implement
the Placing and Open Offer; (ii) granting the Directors authority
to allot and issue the New Ordinary Shares; and (iii) the allotment
of the New Ordinary Shares at the Issue Price, which represents a
discount to the Closing Price of more than 10 per cent; and (iv)
the allotment and issue of New Ordinary Shares to certain related
parties pursuant to the Placing.
The Placing and Open Offer will not proceed unless each of the
Resolutions is passed by the requisite majority.
14. Serious loss of capital
It has recently come to the attention of the Directors that the
value of the Company's net assets is now less than half of its
called up share capital. It is a requirement of the Companies Act
that where the net assets of a public company are half or less of
its called up share capital, the directors must call a general
meeting of the company to consider whether any, and if so what,
steps should be taken to deal with the situation. Accordingly the
business to be conducted at the General Meeting will include
consideration of what, if any, such steps should be taken. If,
however, the Resolutions are approved at the General Meeting such
that the Placing and Open Offer becomes unconditional and the CVA
continues to be in effect, the value of the Company's net assets
will as a result be greater than half of its called up share
capital. Therefore the Directors do not consider that any
additional action needs to be taken to address the serious loss of
capital.
15. Importance of vote and working capital
15.1 Current working capital position
The Company is of the opinion that the Group does not have suf
cient working capital for its present requirements, that is, for at
least the next 12 months from the date of the Prospectus. The Group
will not have suf cient working capital as at the date of the
Prospectus, because the CVA remains subject to the possibility of a
challenge in accordance with the relevant statutory procedure, the
net proceeds of the Placing and Open Offer have not yet been
received and the Post-CVA RCF Amendments have not yet come into
effect.
Consequently, the Directors are of the view that the Group's
future viability is dependent on three key inter-dependent steps
occurring and that unless the net proceeds of the Placing and Open
Offer are received, the Post-CVA RCF Amendments come into effect
and all the conditions to the CVA's continued effect are satis ed,
the Company will no longer be able to continue trading as a going
concern, which would likely result in the appointment of
liquidators or administrators.
15.2 Longer term funding requirements of the Group
The Directors have assessed the working capital resources
required by the Group based on the Revised Business Plan and have
concluded that, in addition to the GBP45 million available to the
Group under the RCF, the approximately GBP10 million of committed
overdraft facilities available to the Group (both of which if the
Post-CVA RCF Amendments are implemented will continue to be
available until 31 December 2019) and the GBP15 million (net)
available to the Group under the terms of the Meditor Loan Note,
the Group requires additional net funding of not less than GBP60
million (which is expected to be met through the net proceeds of
the Placing and Open Offer) and the Post-CVA RCF Amendments coming
into effect in order for the Directors to be in a position to con
rm that the Company has suf cient working capital for its present
requirements that is, for at least the next 12 months from the date
of the Prospectus.
15.3 Approval of the Placing and Open Offer
The Resolutions must be passed by Shareholders at the General
Meeting in order for the Placing and Open Offer to proceed and, as
the continued effect of the CVA and the effectiveness of the
Post-CVA RCF Amendments are dependent upon receipt of the net
proceeds of the Placing and Open Offer, in order for the Post-CVA
RCF Amendments to become effective and for the CVA to continue in
effect.
Therefore, if the Resolutions are not passed by Shareholders at
the General Meeting and the Placing and Open Offer does not
proceed, the CVA will be terminated, the Post-CVA RCF Amendments
will not become effective and the Company will be in default under
the RCF following the General Meeting. Under such circumstances,
the Group will have insuf cient working capital to continue trading
as a going concern which will likely result in the appointment of
administrators or liquidators.
Accordingly, the Directors believe that the Placing and Open
Offer is in Shareholders' best interests and that it is very
important that Shareholders vote in favour of the Resolutions so
that the Placing and Open Offer can proceed and, as a consequence,
the Post-CVA RCF Amendments can come into effect and (absent a
challenge which is not withdrawn or dismissed by the Court by no
later than 5 June 2018 (or such later date, on or prior to the CVA
Challenge Long Stop Date, as the Lenders may agree)) the CVA will
continue in effect.
The Directors have no reason to believe that the Resolutions
will not be approved and that the Placing and Open Offer will not
proceed and accordingly the Directors are con dent that the Company
will receive the net proceeds, enabling the Post-CVA RCF Amendments
to become effective and the CVA to continue in effect (absent a
challenge which is not withdrawn or dismissed by the Court by no
later than 5 June 2018 (or such later date, on or prior to the CVA
Challenge Long Stop Date, as the Lenders may agree)).
15.4 Continued effect of the CVA
On 26 April 2018, the CVA was approved by 89.8 per cent. of
unsecured creditors of the Company who cast a vote. Based on this
level of support by the Company's creditors and the fact that no
creditor proposed any modi cations to the terms of the CVA at the
CVA creditors' meeting, the Directors have no reason to believe
that a creditor will seek to challenge the CVA.
As at 16 May 2018 (being the latest practicable date prior to
publication of this Announcement), the Company had not received any
notice of any challenge application although the CVA Challenge
Period, being the period during which a challenge application may
be made under the terms set out in the CVA Proposal, does not
expire until 28 May 2018 and the continued effect of the CVA is
conditional on any challenge application made in this period being
withdrawn or dismissed by the Court on or prior to the CVA
Challenge Long Stop Date. However, the Post-CVA RCF Amendments are
conditional upon, amongst other things, the CVA not being subject
to a challenge which is not withdrawn or dismissed by the Court by
no later than 5 June 2018 (or such later date, on or prior to the
CVA Challenge Long Stop Date, as the Lenders may agree). As the
continued effect of the CVA and the effectiveness of the Post-CVA
RCF Amendments are inter-conditional, the continued effect of the
CVA is effectively conditional upon it not being subject to a
challenge which is not withdrawn or dismissed by the Court by no
later than 5 June 2018 (or such later date, on or prior to the CVA
Challenge Long Stop Date, as the Lenders may agree).
If the CVA is the subject of a continuing challenge application
on 5 June 2018, the Company and its advisers will evaluate the
likely success of resolving the challenge application. If the
Company and its advisers believe that it is reasonably likely that
the challenge application will be withdrawn or dismissed by the
Court on or before the CVA Challenge Long Stop Date, the Company
would seek the agreement of the Lenders to extend the deadline in
the Post-CVA RCF Amendments and the Pre-CVA RCF Amendments for the
CVA not being subject to a challenge which has not been withdrawn
or dismissed, subject to that date not being later than the CVA
Challenge Long Stop Date. Assuming the Lenders agree to such
request, the Company would also seek the consent of Peel Hunt and
Deutsche Bank under the terms of the Placing Agreement to propose
an adjournment of the General Meeting and a delay in Admission
until after the challenge application has been withdrawn or
dismissed by the Court, subject to such challenge being resolved on
or prior to the expiry of the extended deadline granted by the
Lenders. To the extent necessary, in such circumstances, the
Directors would seek immediate debt nance or other alternative
funding from stakeholders of the Group to enable the Company to
continue to trade whilst seeking to resolve the challenge
application. Whilst no discussions have been undertaken as at the
date of this announcement, the Directors believe that the Company
would be reasonably likely to secure an immediate short term loan
to be repaid from the net proceeds of the Placing and Open Offer
based on the level of support provided by key stakeholders thus far
during the implementation of the Restructuring Plan and the fact
that the Company would not continue to trade if the Directors and
the Company's advisers did not believe it was reasonably likely
that the challenge application would be withdrawn or dismissed on
or prior to the CVA Challenge Long Stop Date. However, there can be
no guarantee that such funding would be available on favourable
terms or at all, and if the Company were to fail to secure such
funding under the circumstances described above, the Group would
have insuf cient working capital to continue trading as a going
concern which would likely result in the appointment of
administrators or liquidators.
If the Company were unable to secure the agreement of the
Lenders and the consent of Peel Hunt and Deutsche Bank under the
circumstances described above, then the Placing and Open Offer
would not proceed, the CVA would be terminated, the Post-CVA RCF
Amendments would not become effective and the Company would no
longer be able to continue trading as a going concern which would
likely result in the appointment of administrators or
liquidators.
Taking into account the circumstances set out above the
Directors are con dent that the Placing and Open Offer will proceed
and that the CVA will continue in effect. However, in the event the
CVA is the subject of a challenge application which cannot be
resolved prior to the expiry of the CVA Challenge Period, the
Group's funding position, as described above, would provide little
latitude to accommodate any delay that may be required to resolve a
challenge application.
To the extent that the CVA is subject to a challenge that has
not been withdrawn or dismissed by the Court on or before 5 June
2018 (or such later date, on or prior to the CVA Challenge Long
Stop Date, as the Lenders may agree) (and therefore the CVA would
be terminated) or the Company experiences a funding shortfall and
is unable to obtain alternative funding before a challenge
application can be resolved or the Placing and Open Offer otherwise
does not proceed to Admission, the Company will no longer be able
to continue trading as a going concern which would likely result in
its listing being suspended and its Ordinary Shares being suspended
from trading on the London Stock Exchange followed by the
appointment of administrators or liquidators.
15.5 Working capital on implementation of the Restructuring
Plan
Accordingly, the Directors are of the opinion that, assuming the
conditions to the CVA's continued effect have been satis ed and
after taking into account the net proceeds of the Placing and Open
Offer and the Post-CVA RCF Amendments becoming effective, the Group
will have suf cient working capital for its present requirements,
that is, for at least the next 12 months from Admission.
Admission will only occur after the net proceeds of the Placing
and Open Offer are received, the Post-CVA RCF Amendments come into
effect and the conditions to the CVA's continued effect have been
satis ed. Accordingly and on this basis, the Directors con rm,
having made due and careful enquiry, that the working capital
available to the Group will be suf cient for its present
requirements, that is for at least 12 months from the date of
Admission.
16. Board recommendation
The Board considers the Placing and Open Offer to be in the best
interests of the Company and its Shareholders as a whole. The
Board, having been so advised by Peel Hunt, considers that each
Related Party Transaction is fair and reasonable as far as the
Shareholders are concerned.
Accordingly, the Board unanimously recommends that Shareholders
vote in favour of the Resolutions.
APPIX I
DEFINITIONS
The following definitions apply throughout this announcement
unless the context requires otherwise:
Admission admission of the New Ordinary Shares
to the Official List and to trading
on the main market for listed securities
of the London Stock Exchange becoming
effective in accordance with LR
3.2.7G of the Listing Rules and
paragraph 2.1 of the Admission
and Disclosure Standards published
by the London Stock Exchange
Application Form the personalised application form
which will accompany the Prospectus
for Qualifying non-CREST Shareholders
for use in connection with the
Open Offer
----------------------------------------------
Articles the articles of association of
the Company
----------------------------------------------
Banks Peel Hunt and Deutsche Bank
----------------------------------------------
Board the board of Directors of the Company
----------------------------------------------
Category A Premises the Group's UK sites that are performing
adequately and/or are sites that
are otherwise core to the Group's
future business and profitability
----------------------------------------------
Category B Premises the Group's UK sites that are marginally
profitable (before absorbing their
share of overhead costs) and/or
in respect of which the property
costs are above market and a rent
reduction is necessary to restore
the medium to long term viability
of these sites
----------------------------------------------
Category B1 Premises Category B Premises, the Company's
leases of which are subject to
a 30 per cent. reduction in the
amount of rent payable pursuant
to the terms of the CVA
----------------------------------------------
Category B2 Premises Category B Premises, the Company's
leases of which are subject to
a 50 per cent. reduction in the
amount of rent payable pursuant
to the terms of the CVA
----------------------------------------------
Category C Premises the Group's UK sites that are underperforming
and/or on unfavourable lease terms,
or, in certain cases, are not expected
to have future strategic value
to the Group, and should not be
part of the Group's real estate
portfolio going forward
----------------------------------------------
Closing Price the closing middle-market price
of a relevant share as derived
from the London Stock Exchange's
Daily Official List on any particular
day
----------------------------------------------
Companies Act The Companies Act 2006
----------------------------------------------
Company or Carpetright Carpetright plc
----------------------------------------------
Compromised Contingent certain creditors of the Company
Property Creditors to whom the Company has contingent
liability in respect of the Company's
existing and previous leasehold
liabilities who are being compromised
pursuant to the terms of the CVA
----------------------------------------------
Compromised Landlords the relevant landlords and any
contingent property creditor of
Category B Premises and Category
C Premises
----------------------------------------------
Compromised Lease Fund the compromised lease fund established
by the Company pursuant to the
terms of the CVA
----------------------------------------------
Conditional Placees such persons as have agreed to
subscribe for New Ordinary Shares
subject to clawback to satisfy
valid applications by Qualifying
Shareholders under the Open Offer
----------------------------------------------
Court The High Court of Justice in England
and Wales
----------------------------------------------
Crescent Crescent Holding GmbH
----------------------------------------------
CREST the electronic transfer and settlement
system for the paperless settlement
of trades in listed securities
operated by Euroclear
----------------------------------------------
CVA the company voluntary arrangement
between the Company and its creditors
under Part I of the Insolvency
Act 1986 (as amended from time
to time) on the terms set out in
the CVA Proposal
----------------------------------------------
CVA Challenge Long Stop 29 June 2018
Date
----------------------------------------------
CVA Challenge Period the period commencing on 30 April
2018 and expiring on 28 May 2018
----------------------------------------------
CVA Proposal the document setting out the terms
of the CVA published on 12 April
2018
----------------------------------------------
CVA Supervisors or Supervisors jointly and severally the Nominees
or such other person(s) elected
to act as supervisor(s) of the
CVA pursuant to the terms of the
CVA
----------------------------------------------
Deutsche Bank Deutsche Bank AG, London Branch
----------------------------------------------
Directors the Executive and Non-Executive
Directors of the Company
----------------------------------------------
Enlarged Issued Share Capital the issued ordinary share capital
of the Company following the issue
of the New Ordinary Shares pursuant
to the Placing and Open Offer
----------------------------------------------
Euroclear Euroclear UK and Ireland Limited,
the operator (as defined in the
CREST Regulations) of CREST
----------------------------------------------
Excluded Territories Australia, Canada, Japan and the
Republic of South Africa and any
jurisdiction where the extension
and availability of the Open Offer
(and any other transactions contemplated
in relation to it) would breach
any applicable laws or regulations
and Excluded Territory shall mean
any of them
----------------------------------------------
Existing Issued Share Capital the issued ordinary share capital
of the Company prior to the issues
of the New Ordinary Shares pursuant
to the Placing and Open Offer
----------------------------------------------
Existing Ordinary Shares the 71,323,943 Ordinary Shares
which will be in issue at the date
of the Prospectus
----------------------------------------------
FCA the UK Financial Conduct Authority
----------------------------------------------
General Meeting the general meeting of the Company
to be convened pursuant to the
Notice of General Meeting in order
to, amongst other things, pass
the Resolutions, including any
adjournment thereof
----------------------------------------------
Group the Company and its subsidiaries
and subsidiary undertakings, and,
where the context requires it,
its associated undertakings
----------------------------------------------
Independent Shareholders all Shareholders with the exception
of Meditor and Crescent
----------------------------------------------
Issue Price 28 pence per New Ordinary Share
----------------------------------------------
Joint Bookrunners Peel Hunt and Deutsche Bank
----------------------------------------------
Lenders the Fifth Restatement Date Lenders
(as defined in the RCF), being
(as at the date of this Announcement)
(i) National Westminster Bank Plc;
and (ii) AIB Group (UK) p.l.c.
----------------------------------------------
Listing Rules the listing rules of the FCA made
under section 74(4) of the FSMA
----------------------------------------------
London Stock Exchange London Stock Exchange plc
----------------------------------------------
Meditor Meditor Master Fund Limited
----------------------------------------------
Meditor Facility the GBP12.5 million unsecured loan
with Meditor entered into on 21
March 2018
----------------------------------------------
Meditor Loan Note the GBP15 million (net) loan note
with Meditor entered into on 10
May 2018
----------------------------------------------
Natwest Overdraft Facility has the meaning given to it in
paragraph 6 of this announcement
----------------------------------------------
New Ordinary Shares the 232,463,221 new Ordinary Shares
for which Qualifying Shareholders
will be invited to apply under
the terms of the Open Offer
----------------------------------------------
Next Payment Date the next date falling on or after
24 June 2018 on which principal
rent is payable under a lease subject
to the CVA
----------------------------------------------
Nominees the nominees in respect of the
CVA as defined in section 1(2)
of the Insolvency Act 1986 (as
amended from time to time)
----------------------------------------------
Notice of General Meeting the notice convening the General
or Notice Meeting which will be set out at
the end of the Prospectus
----------------------------------------------
Official list the Official List maintained by
the FCA
----------------------------------------------
Open Offer the invitation to Qualifying Shareholders
to subscribe for New Ordinary Shares
at the Issue Price on the terms
and subject to the conditions which
will be set out in the Prospectus
----------------------------------------------
Open Offer Entitlements an entitlement to apply to subscribe
for one New Ordinary Share, allocated
to a Qualifying Shareholder pursuant
to the Open Offer
----------------------------------------------
Ordinary Shares ordinary shares of one penny each
in the Company
----------------------------------------------
Overseas Shareholders Shareholders with registered addresses
outside the United Kingdom or who
are citizens or residents of countries
outside the United Kingdom
----------------------------------------------
Peel Hunt Peel Hunt LLP
----------------------------------------------
Placing the subscription by the Conditional
Placees for New Ordinary Shares
subject to clawback to satisfy
valid applications by Qualifying
Shareholders under the Open Offer
----------------------------------------------
Placing Agreement the sponsor and placing and open
offer agreement entered into between
the Company, Peel Hunt and Deutsche
Bank relating to the Placing and
Open Offer
----------------------------------------------
Placing and Open Offer the Placing and Open Offer
----------------------------------------------
Post-CVA RCF Amendments has the meaning given to it in
paragraph 6 above
----------------------------------------------
Pre-CVA RCF Amendments has the meaning given to it in
paragraph 6 above
----------------------------------------------
Pre-CVA RCF Waivers has the meaning given to it in
paragraph 6 above
----------------------------------------------
Prospectus the document to be issued by the
Company in connection with the
Placing and Open Offer and Admission
and approved under the Prospectus
Directive
----------------------------------------------
Qualifying CREST Shareholders Qualifying Shareholders holding
Ordinary Shares in uncertificated
form on the Record Date
----------------------------------------------
Qualifying Non-CREST Shareholders Qualifying Shareholders holding
Ordinary Shares in certificated
form on the Record Date
----------------------------------------------
Qualifying Shareholders holders of Ordinary Shares on the
register of members of the Company
at the Record Date
----------------------------------------------
RBS the Royal Bank of Scotland plc
----------------------------------------------
RCF the Revolving Facility Agreement
dated 19 March 2008 and entered
into between (1) the Company; (2)
RBS and AIB Group (UK) plc as Arrangers;
(3) RBS as Agent and (4) RBS as
Security Trustee
----------------------------------------------
RCF Amendments the Pre-CVA RCF Amendments, the
Pre-CVA RCF Waivers and the Post-CVA
RCF Amendments, taken together
----------------------------------------------
Record Date close of business on 16 May 2018
----------------------------------------------
Regulatory Information one of the regulatory information
Service services authorised by the UK Listing
Authority to receive, process and
disseminate regulatory information
from listed companies
----------------------------------------------
Related Party Transactions the related party transactions
set out in paragraph 10 of this
announcement
----------------------------------------------
Resolutions the Resolutions which will be set
out in the Notice of General Meeting
----------------------------------------------
Restructuring Plan the CVA, the Post-CVA RCF Amendments
and the Placing and Open Offer
taken together
----------------------------------------------
Revised Business Plan the Company's revised business
plan as set out in paragraph 4
of this announcement
----------------------------------------------
Shareholders holders of Ordinary Shares
----------------------------------------------
Sponsor Peel Hunt
----------------------------------------------
Ulster Bank Overdraft Facility has the meaning given to it in
paragraph 6 of this announcement
----------------------------------------------
United Kingdom or UK the United Kingdom of Great Britain
and Northern Ireland
----------------------------------------------
United States or US the United States of America, its
territories and possessions, any
state of the United States of America
and the District of Columbia
----------------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IOEGGUGWAUPRUAR
(END) Dow Jones Newswires
May 18, 2018 02:00 ET (06:00 GMT)
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