Carpetright (LON:CPR) is to seek creditor protection, slash its store portfolio and ask shareholders for a substantial cash injection to alleviate a looming cash crisis.
Wilf Walsh, chief executive of the carpets and flooring group, said discussions with its creditors were underway over a company voluntary arrangement.
READ: Retail misery: Carpetright says in talks with banks to shore up balance sheet as it issues a third profit warning
These arrangements typically involve a debt or rent restructuring and creditors foregoing some of the money owed them.
Walsh said a CVA would enable it to rationalise the current property portfolio, especially the poorly performing stores with long leases left.
An equity raise of between £40-60mln would follow and enable Carpetright to face the 'competitive threat' it now faces, he said.
“The conditional equity issue, which is intended to follow a successful CVA, would recapitalise the group and we believe provide the necessary funds to accelerate its turnaround and address the competitive threat from a position of financial strength”.
Walsh blamed the store opening programme undertaken by previous management for the crisis.
That had left the group “burdened with an oversized property estate consisting of too many poorly located stores on rents which are simply unsustainable,” he said.
To keep going in the short-term, the troubled retailer has arranged a £12.5mln emergency loan with major shareholder Meditor European Master Fund.
Carpetright warned earlier this month about an impending crisis as it forecast a loss for the year and said talks had started with its banks.