Courts has warned that shareholders risk being wiped out under plans for an emergency cash injection to recapitalise the struggling furniture retailer. Its shares collapsed yesterday.
The company, which has bank debt of about £300m, said an independent review by Close Brothers had concluded that a debt-for-equity swap was inevitable. It has submitted a revised strategic plan to its principal lenders.
Courts' shares halved to 14.75p, valuing the business at just £9m and almost wiping out the dregs of the founding Cohen family's fortune. The stock was worth more than 300p earlier this year.
Courts' bankers are preparing to waive "certain" banking covenants shortly, the company said, adding: "Discussions regarding immediate additional funding are continuing."
The company has appointed Alvarez & Marsal, an international turnaround firm, to advise on restructuring alternatives. This is in spite of employing Alan Fort, who was billed as a restructuring expert when he took over as managing director of its UK business almost 12 months ago.
Courts is heading for a pre-tax loss of £30m, after losing £34m last year. Its UK business is in turmoil: like-for-like sales were down by more than 20 per cent and it has yet to receive the new stock it plans to sell over Christmas.
Richard Ratner, an analyst at Seymour Pierce, said: "At best, a recapitalisation with shareholders being diluted out of sight. At worst, although the banks will probably agree to the waivers, they may regard the request for additional funding as throwing good money after bad."
The company said: "The board's expectation is that the proposed recapitalisation or any alternative structure that may result from the discussions is likely to lead to a significant diluting of existing shareholders' interests."
It has put plans to create a regional holding company in the Far East on ice, but said it is still pursuing its inten-tion to spin off its Caribbean businesses.
Courts purged its board of all Cohen family members earlier this year. It is being run by four directors, including Leo McKee, the chairman, who were appointed by its bankers.Reuse content