Ailing Courts considers asset sales

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The Independent Online

Courts, the struggling furniture retailer, has asked the investment bank Close Brothers to review all options for its future.

The group, which has issued a string of profit warnings this year, admitted earlier this month that it was in talks with its principal lenders once again. It owes its bankers about £300m and is forecast to lose £30m this year, on top of the £34.4m it lost last year.

Leo McKee, one of three directors parachuted in by the banks to salvage the company, is not ruling anything out, including possible asset sales. Other options include a debt-for-equity swap, likely to wipe out existing shareholders, or turning the business round in its current state.

Courts, which has purged its board of all founding Cohen family members, has a thriving overseas business. It has 350 stores in 21 countries and gets almost two-thirds of its turnover from outside the UK. Its Caribbean arm spans 11 countries, and includes a separately quoted business in Jamaica worth £107m. Its Asia-Pacific arm includes three separately quoted units in Mauritius, Singapore and Malaysia, with a combined market valuation of more than £100m.

Close Brothers was appointed several weeks ago to give the new executive team an independent low-down of the group's options. Courts could reveal the outcome of the review later this month when it is due to update the market before its peak trading period.

Separately, it emerged yesterday that Courts is being stalked by the US owner of Furnitureland, one of its main UK rivals. Schottenstein Stores Corporation's European arm, SB Capital, is understood to be one of a number of bidders circling the group. It is thought to have approached Courts's bankers during the past seven days. Any deal would probably involve a debt-for-equity swap.

The value of Courts has been decimated during the past year. On Friday its shares were worth just 38p, giving it a market capitalisation of £22m. Moody's KMV, a credit analyst, believes Courts is 30 times more likely to default on its debts than it was seven months ago. City analysts have warned investors the business could end up in administration if the post-Christmas period goes badly.