Mothercare has successfully refinanced and announced a strategic joint venture, shaping a promising future for the brand.
- The brand secured £8 million in debt facilities with Gordon Brothers to reduce financial liabilities.
- A joint venture in South Asia with Reliance Brands has been formed, offering £16 million in investment.
- Reliance Brands will hold a 51% stake, strengthening Mothercare’s market presence in several South Asian countries.
- The new agreements promise growth, improved revenue, and reduced financial risk for Mothercare.
Mothercare has taken crucial steps to secure its financial stability and pave the way for future growth through recent agreements with Gordon Brothers and Reliance Brands. The brand managed to refinance its existing debt by securing £8 million in debt facilities with Gordon Brothers. This move marks a significant reduction in financial liabilities, positioning Mothercare for enhanced flexibility and reduced interest costs moving forward.
In a strategic move to expand and strengthen its presence in South Asia, Mothercare has entered into a joint venture with a subsidiary of Reliance Brands. This partnership injects £16 million into the business, with Reliance Brands acquiring a 51% stake in the joint venture company. This company will control the Mothercare brand and related intellectual property and franchises across key regions including India, Nepal, Sri Lanka, Bhutan, and Bangladesh. The new arrangement supersedes a previous franchise agreement that had a limited scope focused solely on India.
Under the revised terms, Mothercare will retain a 49% stake in the joint venture, allowing it to benefit significantly from both sourcing fees and value creation due to its equity position. The restructuring is expected to lead to robust business growth and surpass previous revenue benchmarks over the next few years. The arrangement anticipates a strong performance, contributing positively to Mothercare’s financial health by reducing debt and fostering a healthier balance sheet.
Clive Whiley, the chair of Mothercare, highlighted the importance of these developments. He emphasized how the agreements with Reliance and Gordon Brothers not only strengthen Mothercare’s operational foothold in South Asia but also allow for a substantial reduction in bank facilities and financial leverage. Clive Whiley stated, “Today’s agreements with Reliance and Gordon Brothers strengthen our operations in South Asia and support a material reduction in our bank facilities and leverage.”
The effects of these financial strategies are already evident as Mothercare has started applying the proceeds from the joint venture towards refinancing its existing debt facilities. The previous hefty term loan of £19.5 million with a high interest rate of 13% per annum has been replaced by a more manageable £8 million term loan at a reduced rate of 4.8% per annum.
These strategic financial steps are poised to propel Mothercare forward, ensuring sustainable growth and stability in its future operations.
