Mothercare will on Thursday take the extraordinary step of rehiring the chief executive it sacked last ?month as it unveils a rescue plan involving the closure of 50 high street shops.
Sky News? has learnt that the struggling retailer will announce alongside its full-year results that Mark Newton-Jones is to rejoin it just 36 days after his unexpected exit.
Mr Newton-Jones was ousted in early April by chairman Alan Parker, who has himself since left the business.
The surprise move will form part of a bold restructuring plan that will see Mothercare shut 50 shops – more than one-third of its 137-strong UK portfolio ?- within 12 months; announce an extension of its borrowing facilities with its lenders; tap shareholders for more than £35m in new equity; and secure backing from pension stakeholders for revised funding arrangements.
The store closure plans will trigger hundreds of job cuts, although one insider said it would be fewer than 1,000 of Mothercare’s 3,000 full-time equivalent workforce.
Mothercare will implement the reorganisation of its UK high street presence through an insolvency mechanism called a Company Voluntary Arrangement (CVA), which will be overseen by KPMG.
It will follow New Look, Carpetright, House of Fraser, Prezzo, Byron and Toys R Us UK, all of which have announced CVAs in recent months in an effort to shed loss-making sites.
Despite its status as one of Britain’s most prominent retailers, Mothercare is now a stock market minnow, with a market capitalisation of just £33m.
Its plans to raise more than that amount by issuing new shares will require investor support.
Image: Mark Newton-Jones is to rejoin 36 days after his unexpected exit
Mothercare will also need creditors to vote in favour of the CVA, with one source saying on Wednesday evening that the Pension Protection Fund (PPF) – which could block the proposal – would be supportive.
The company’s full-year financial results, due out on Thursday, are forecast by City analysts to reveal a slump in profits, underlining the difficulties facing it.
Mothercare said earlier this year that it was in danger of breaching borrowing agreements with its lenders, and indicated that its results announcement was a critical juncture at which it would need to spell out a survival plan.
Sources said that Clive Whiley, a turnaround specialist who joined Mothercare as interim executive chairman a month ago, had been instrumental in pulling the various elements of the rescue package together.
Thursday’s deal will involve an eventual UK store target of 73, while its £67m banking facilities, provided by Barclays and HSBC, would be extended until 2020.
Working capital from Mothercare’s international franchise partners will also be part of the package.
The decision to rehire Mr Newton-Jones will be perhaps the biggest surprise in Thursday’s statement.
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His appointment is expected to mean that David Wood, who replaced Mr Newton-Jones five weeks ago, will move to another executive role.
Mothercare declined to elaborate on a statement it issued on Monday, in which it said it was “finalising a comprehensive restructuring and refinancing package to put the business on a stable and sustainable financial footing”.