Mothercare has announced a major refinancing deal and a new joint venture, strengthening its market position.
- The refinancing includes an £8m debt facility with Gordon Brothers, aiming to reduce financial leverage.
- A joint venture with Reliance Brands will inject £16m, with Reliance holding a majority stake.
- This new venture will replace an existing franchise agreement and covers several South Asian countries.
- Mothercare expects these developments to significantly enhance its financial flexibility and market reach.
Mothercare is advancing its strategic initiatives by securing a significant refinancing arrangement and forming a new joint venture, which are set to enhance its operational dynamics and growth trajectory. The company has finalised an £8 million debt facility with Gordon Brothers, which marks a step towards reducing its financial leverage while ensuring the sustainability of its operations.
A pivotal component of these developments is the establishment of a new joint venture with Reliance Brands. This venture is characterised by a substantial £16 million investment, with Reliance Brands acquiring a 51% majority stake. The joint venture will encompass ownership of the Mothercare brand and related intellectual property across India, Nepal, Sri Lanka, Bhutan, and Bangladesh.
This agreement signifies a transition from the previous franchise arrangement with Reliance Brands, which was limited to India and had a term of 30 years. Noteworthy is Mothercare’s retention of a 49% stake in this broader venture, enabling ongoing participation in the business’s potential growth.
The financial reorganisation underlines Mothercare’s commitment to fortifying its balance sheet. By applying proceeds from the joint venture to refinance existing debt facilities with Gordon Brothers, Mothercare has effectively replaced a costly £19.5 million term loan with a more favourable £8 million two-year term loan at reduced interest, thus enhancing financial flexibility.
Clive Whiley, Chair of Mothercare, remarked on the agreements, emphasising the strengthened operations in South Asia and significant reduction in bank facilities and leverage. He acknowledged the long-standing collaboration with Gordon Brothers and highlighted the advantageous nature of the revised facility agreement alongside the accretive value of the joint venture.
Despite recently suspended trading of its shares on the AIM due to delays in audited results, Mothercare’s strategic moves signal a proactive approach to regaining financial stability and growth prospects.
These strategic developments are set to enhance Mothercare’s financial health and expand its market footprint in South Asia.
