Mothercare plc (LON:MTC) is to launch a £32.5mln equity raise and plans to close more stores as the UK retailer restructures the business to cope with challenging trading conditions.
Shares in Mothercare plunged 8.5% to 26p in morning trading.
The company, which sells products for expectant mothers and children under nine, said revised debt facilities of £67.5mln remain conditional on the equity raise.
The fully underwritten equity issue is expected to be completed on July 27.
Mothercare will shut 60 stores by June 2019 – instead of the 50 previously earmarked for closure – and has negotiated reduced rents for 19 stores, as part of an insolvency process known as a company voluntary arrangement (CVA).
READ: Mothercare to close half of its stores and bring back former boss as part of turnaround plan
Childrens World enters administration
The group also said its Childrens World division was being placed into administration after creditors turned down a proposal through the CVA.
Thirteen of the 22 Childrens World will transfer to other Mothercare group companies to continue trading.
"How long-standing shareholders must wish their board had accepted a 300p bid from US peer Destination Maternity back in 2014," said Russ Mould, AJ Bell investment director.
“Claims that bid undervalued the business and its ‘attractive prospects’ look pretty laughable now.”
A raft of struggling retailers, including New Look, House of Fraser, Debenhams PLC (LON:DEB) Carpetright PLC (LON:CPR), have been shutting stores and negotiated reduced rents through CVAs after falling victim to weak consumer confidence and online competition.
READ: CVAs explained: What is a company voluntary arrangement?
In May Mothercare unveiled plans to close almost half of its stores over the next four years as part of its turnaround strategy.
At the time it also said it was bringing back former chief executive Mark Newton-Jones, who was sacked in April following a profit warning a month earlier.
Difficult trading in UK retail
In Monday’s update, the company said current trading continues to be challenging in the UK with “some stability” in international operations.
The retailer has identified £19mln of cost savings under its restructuring plan.
"We have seen an unprecedented period for UK retail and we have not been alone in facing a number of strong headwinds,” said Newton-Jones.
“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.”
Many investors 'given up on high street retail sector', says analyst
Rebecca O’Keeffe, head of investment at Interactive Investor, said Mothercare's latest troubles demonstrate "how difficult life is for high street retailers.
She added: "Transforming legacy businesses, making them relevant, and generating enough footfall that goes on to buy your product instore, rather than testing it out and then going home to get a better deal online, is incredibly tough.
"Many investors have given up on the high street retail sector altogether and others are wondering just how long they will have to wait for management to deliver their turnaround strategies, or if it is worth the wait at all."