Major investor swallows £41m of Carpetright’s huge debt pile
One of Carpetright’s largest shareholders has paid to take on £40.7m of the retailer’s debt, sending shares surging.
Meditor European Master Fund has underwritten a loan from Natwest and Ulster Bank to the carpet company to keep its revolving credit facility active.
Read more: Carpetright shares buoyed as turnaround plan remains on track
Carpetright’s share price soared 13 per cent from a low base in early morning trading to 15.2p as investors welcomed the intervention.
“The overdrafts will continue to be provided by NatWest and Ulster Bank,” Carpetright explained.
“However, Meditor has agreed to enter into participation agreements with Natwest and Ulster Bank, pursuant to which Meditor will acquire a 100 per cent participation interest in each overdraft facility, effectively providing funding for the banks. The terms of the overdrafts remain unchanged.”
The struggling high street retailer is in the midst of a turnaround strategy that has seen it slash costs and close a swathe of stores in a company voluntary arrangement (CVA).
Still, revenue fell in its most recent full-year results by 13 per cent to £386.4m. But Carpetright cut its annual loss to £25m from £70m.
The firm reduced its level of debt to £41m from the £45m in July after selling two Dutch properties.
Read more: Landlords are fighting back against retailers’ last ditch defence, the CVA
Shore Capital welcomed the update but said the recovery “remains work in progress”.
“In our view, this is another staging post in the Carpetright recovery following the CVA and rescue rights issue last year, which gave the company a fighting chance to rebuild profits and cashflow to a more sustainable level,” the broker said.