(Reuters) - British retailer Carpetright (CPRC.L) has agreed a loan with a shareholder in exchange for new shares to fund the short term running of the company, and may raise another 60 million pounds ($84 million) to try to turn its business around, it said on Wednesday.
Shares in the company, which sells floor coverings, were up almost 6 percent at 43 pence at 0819 GMT.
Carpetright, which has issued a series of profit warnings because of weak UK retail spending, said it would also look to reduce the number of its outlets to address a problem of “too many poorly-located stores on rents which are simply unsustainable.”
The company has also agreed a possible insolvency procedure with creditors which would allow it to issue up to 60 million pounds of shares to fund ongoing strategy and pay down debt.
The agreement would also mean an adjustment of its financing conditions and a relaxation of covenants, it said.
It has agreed a 12.5 million pound loan with shareholder Meditor in exchange for 5 percent of new shares at Tuesday’s 40.1 pence per share closing price.
“These further cash resources will enable us to make the necessary decisions free from short term funding pressure,” said Wilf Walsh, Carpetright’s Chief Executive.
“While the board is confident that its brand investment and store refurbishment strategies have been, and will continue to be, successful in enabling Carpetright to respond to increased competition, it believes additional measures are necessary to directly address this legacy property issue,” he added.
Reporting by Elisabeth O'Leary; Editing by Kate Holton and Keith Weir