Mothercare calls in PwC to renegotiate banking covenants

Mothercare has asked banks HSBC and Barclays for more headroom to help it invest in opening new stores.

The mother and baby products retailer has brought in PwC to help renegotiate its terms, according to the Daily Telegraph.

It is understood that there is no danger of the retailer breaching its banking covenants but its current terms give it little opportunity to plan ahead. The retailer, which is closing underperforming UK stores, wants to open in key locations such as Westfield Stratford City.

In a statement this morning Mothercare said: “In accordance with normal practice Mothercare is in regular dialogue with all of its financing partners, including the banks. As confirmed in the fourth quarter trading statement, underlying profit before tax for the year ended March 29 2014 is expected to be in line with current market forecasts, and net debt is also expected to be in line with previous guidance.

“Mothercare is and expects to remain in compliance with the provisions and covenants of its facilities. Mothercare continues to discuss with its banks its future plans for the business and the consequential funding requirements, and is grateful to them for their continued support.”

This is the latest move by Mothercare to help it turn around its UK business. Retail Week revealed on Friday that it had asked its suppliers for concessions to help to claw back margin that has been hit by the price war in the sector.

The retailer sent letters to all suppliers last week informing them of a move in payment terms to 90 days and to secure a 2.5% settlement discount. At present, Mothercare suppliers are on a range of different payment terms.