Mothercare has placed its subsidiary, Childrens World, into administration after its company voluntary arrangement (CVA) proposal failed to gain support from creditors.
On 1 June more than the required 75% of Mothercare UK creditors approved the retailer’s CVA proposals, under which it will close up to 50 stores and receive rent reductions on a further 21.
However, only 73.3% of creditors approved a proposed CVA for Childrens World, which accounts for an additional 22 stores.
Mothercare said it will transfer 13 of the 22 stores to other Mothercare group companies to continue trading.
CVA challenge periods for both Mothercare UK Limited and ELC Limited completed last week, and the business said no challenges were made or filed with the High Court.
Mothercare has also said it aims to raise £32.5m from its existing shareholders through a fully underwritten equity issue.
It added that current trading continues to follow the patterns seen in the second half of the last financial year, with “challenging conditions” in the UK, but some stability in its international operations.
The group has identified cost savings totalling £19m and £10m cash realisation arising out of the processes outlined above and other programmes.
Clive Whiley, interim executive chairman, said: “When I joined the business just three months ago, Mothercare faced a bleak future with growing and pressing financial stresses upon the business. We have worked tirelessly as a team to get to where we are today and this fully underwritten equity issue marks the end of this initial phase, returning the group to financial stability.
“Alongside the fundraising, we have been very busy on numerous fronts to restructure the Group for future profitability. Whilst the lack of full approval for the Childrens World CVA was disappointing, we have now found a solution which allows us to go further and faster with the right-sizing of our store portfolio. We have also identified significant areas for further efficiencies and cost savings, which will underpin our return to a sustainable future.
“The last three months of hard work and progress have put in place the foundations to get Mothercare back to where it should be as a fit-for-purpose business with a stronger and more efficient structure both for our UK business and our international franchisees.”
Mark Newton-Jones, chief executive, added: “After a very challenging period for our business, we have now finalised arrangements to restructure and refinance the group, ensuring that the transformation of the Mothercare brand we started four years ago can now be completed. Mothercare is a great British brand with over 50 years of heritage and we now have the financing in place to take it forward for many more years to come.
“We have seen an unprecedented period for UK retail and we have not been alone in facing a number of strong headwinds. I’m pleased to say however, that we are now in a position to re-focus on our customers and improve the Mothercare brand both in the UK and across the globe. We have exciting plans ahead to revitalise the brand through enhancing our product ranges, improving our design and value, developing our digital and multi-channel proposition and investing in our people. Our goal remains clear, to be the leading global specialist for parents and young children.”