Mothercare announces a major refinancing deal and a strategic joint venture.
- The company has secured an £8m debt facility with Gordon Brothers.
- A new joint venture with Reliance Brands raises £16m for South Asia.
- Reliance will hold a 51% stake in this joint venture, covering several countries.
- Mothercare anticipates strong growth and reduced indebtedness from these deals.
In a significant move, Mothercare has successfully secured an £8m debt facility with Gordon Brothers, bolstering its financial foundation. This strategic refinancing replaces a previous £19.5m loan, reducing the interest rate from 13% to a more manageable 4.8% per annum.
The company has also initiated a joint venture with Reliance Brands for South Asian markets. This partnership has attracted a substantial investment of £16m. Reliance Brands will take a 51% stake in the joint venture, encompassing territories such as India, Nepal, Sri Lanka, Bhutan, and Bangladesh. Notably, Mothercare retains a 49% stake, signifying a shared vision for future growth.
This new arrangement replaces the previous franchise agreement with a more focused strategy. The joint venture aims to exceed previous revenue markers, reflecting a commitment to expanding Mothercare’s market presence. Under the former setup, India’s contribution was approximately £0.9m to adjusted EBITDA in FY24.
Mothercare’s enhanced financial position is expected to drive substantial company growth. The revised debt obligations provide a more flexible financial environment, accommodating potential investments and operational improvements. The company plans to channel the proceeds from the Reliance deal into its refinancing activities, further stabilising its fiscal health.
Chair of Mothercare, Clive Whiley, emphasised the strengthened ties with both Reliance and Gordon Brothers, stating, “Today’s agreements…support a material reduction in our bank facilities and leverage.” This strategic alignment is poised to enhance the equity value of Mothercare, highlighting the accretive nature of the collaboration.
With these strategic financial adjustments, Mothercare is poised to foster robust growth and navigate future opportunities with increased confidence.
