UK-based floor covering retailer Carpetright has announced that its shareholder, hedge fund Meditor Capital Management, has agreed to buy the £40.7m ($49.8m) revolving credit line from its lenders Natwest and AIB.
As of late May, Meditor owned just less than 30% of Carpetright. This threshold enables the hedge fund for a takeover offer.
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Meanwhile, the day-to-day overdraft of £6.5m will continue to be provided by NatWest and Ulster Bank.
Carpetright said: “Meditor has confirmed it now intends to engage with the Company with a view to providing a more stable and longer-term funding platform.”
Last year, Carpetright’s shareholders supported a restructuring plan, which included the closure of 80 underperforming stores and retaining 23 stores on a nil-rent basis.
According to Carpetright, the hedge fund did not seek a board representation or structural changes in the business as part of the overdraft agreement.
For several years, the retailer has been dealing with a large debt load. It took two short-term loans last year from Meditor.
The first loan of £12.5m was taken in March under which Carpetright agreed for a £1.9m fee and a 3% interest, while the second loan of £15m was taken in May with a £2.3m fee and an 18% interest.
In its full-year results reported earlier this year, the retailer posted a 13.4% drop in sales to £386.4m. Pre-tax losses, however, improved from £69.8m to £24.8m.
Following the sale of its two Dutch locations, the firm reduced its debt from £45m to £41m in July.
