Business

Gaffe disrupts Mothercare rescue plan

Mothercare customers Image copyright Newscast

The future of 21 Mothercare stores has been left uncertain after the struggling retailer admitted that its advisers, KPMG, got their sums wrong.

Last Friday, the firm said lenders had backed a restructuring plan including store closures and rent reductions.

However, it has now emerged that plans for one division had not been approved by the necessary 75% majority.

This division includes 21 stores, of which one was due to close while the rest were due to see lower rents.

On Friday, the mother and baby products retailer had sought backing for a restructuring plan that would have led to the closure of 50 stores.

Creditors voted separately on a company voluntary arrangement (CVA) - which allows companies to shut loss-making shops and reduce rents - for the company's three divisions: Mothercare UK, Early Learning Centre, and Childrens World.

The retailer originally said that the CVA had been approved. However, Mothercare now says the vote for its Childrens World division, which employs 336 people, had failed "by a very narrow margin" with 73.3% backing the CVA move.

The retailer said the announcement would not affect its other restructuring plans.

A KPMG spokesperson said: "As part of the usual procedure, KPMG further scrutinised the voting before court filing, at which time it became apparent that a creditor had filed its vote incorrectly.

"KPMG's judgement, as independent CVA nominees, is that notwithstanding the deficiencies in the paperwork, the intention of that creditor was to vote against the Childrens World CVA. In applying that judgement, the result of the creditor vote fell to 73.3%, just below the 75% threshold required for the creditor vote to be carried."

Mothercare has nearly halved its store numbers over the past five years as it struggled to react to a changing retail environment.

The company plunged to a £72.8m loss in its most recent financial year, as it took hefty charges to pay for closing stores and reorganising the business.

CVAs have become commonplace this year as a number of big high street names struggle to stay afloat.

Earlier this year, toy store chain Toys R Us collapsed into administration, as did electronics retailer Maplin.

Carpetright has entered into a CVA and announced store closures, along with fashion chain New Look.

A number of reasons have been cited for failures on the High Street, including a squeeze on consumers' income, the growth of online shopping and the rising costs of staff, rents and business rates.‎

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