Courts furniture in life-saving talks

Troubled British furniture group Courts delivered a hammer blow to investors today by announcing it had been forced into talks over a life-saving financial overhaul.

Shares plummeted 55% to an all-time low after it warned the proposed restructuring could lead to a “significant dilution” of its share capital.

The company, which has issued two profits warnings in the past two months, is believed to be considering a debt-for-equity swap aimed at wiping out its debt mountain, among other options.

Shares have plunged 96% from 335p in January to just 12.5p today as the firm suffered flagging sales in the UK, where consumers have been cutting back spending on big ticket items.

Just three weeks ago Courts revealed same-store sales at the UK division were 20% lower, meaning the arm would be loss-making in the second half of its current financial year. It said at the time that it was in talks with the providers of its £280m (€400m) debt facility.

The group said today: “The board’s expectation is that the proposed recapitalisation or any alternative structure that may result from the discussions is likely to lead to a significant dilution of existing shareholders’ interests.”

It has submitted the proposals to its lenders and will update investors on the outcome in due course. It also expects certain debts to be deferred.

While it is still in talks with its lenders, Courts said it had delayed the creation of a regional holding company in the Far East.

Richard Ratner, retail analyst at stockbroker Seymour Pierce, said that at worst, it could mark “the end of the road” for Courts.

He said: “If this is a debt-for-equity swap there’s still no guarantee they’re going to get it right.”

Courts, which has 350 stores worldwide, has been trying to overhaul the UK division through measures such as strengthening its management team.

But it said in September that these initiatives, which also include an overhaul of its supply chain, had a “markedly disruptive effect” on trading.

Courts was also hit this year by the impact of Hurricane Ivan on its Caribbean division, which consists of 91 stores.

The group posted annual losses of £34.4m (€49.1m) in its last financial year, far worse than had been expected.