Wilko is scrambling to obtain a much-needed capital infusion to secure its future through a financial restructuring.
According to sources at Sky News, the company, owned by its founding family and employing approximately 12,000 individuals, is working with advisers to raise tens of millions of pounds in new equity within the next few weeks.
Company voluntary arrangement (CVA) initiated to reduce rent
As part of its efforts, Wilko is finalising a company voluntary arrangement (CVA) that would lead to substantial rent reductions at hundreds of its stores. City sources reported that the retailer approached several potential financial investors this week to secure funds supporting its CVA proposal.
Discussions are underway between the company, PricewaterhouseCoopers (PwC) and various turnaround investors experienced in such situations.
It is anticipated that any new equity funding would result in the dilution of the Wilkinson family’s ownership of the company. Insiders have suggested that a minority stake sale is a probable outcome, although all possibilities remain under consideration.
Administration remains a possibility
Wilko has no plans to close any of its approximately 400 stores across the UK as part of the proposal. However, if new funding cannot be secured, there is a risk that the company may face administration, according to a concerned landlord.
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In an administration, the responsibility of overseeing the affairs, business and assets of an insolvent company falls upon an administrator. It is a legal requirement for the administrator to be a licensed insolvency practitioner. When a company is unable to fulfil its financial obligations, either its directors or creditors have the option to apply to the court for the company to enter administration.
In the past, Wilko has secured a £40m ($51.2m) loan from Hilco UK, a specialist retail investor and lender that also owns Homebase. However, it is now understood that the company requires new funding in the form of equity rather than debt.
Last month, Sky News revealed that Wilko enlisted property advisers from CBRE to engage in crucial talks with landlords regarding rent reductions across its store estate.
Wilko chief executive Mark Jackson attempted to reassure investors and creditors: “As directors, we continue to explore all available options for the business. In addition to cost-cutting measures and operational transformation, we are actively seeking opportunities to recapitalise the business, ensuring a stable platform for the next phase of recovery. Our plan is to maximise the significant opportunities that exist to re-establish a profitable Wilko.”