Mamas and Papas CVA approved

7 July 2014

The childrenswear and accessory store (popular with the middles classes), Mamas and Papas, is in a spot of financial trouble and is looking to find ways of closing stores according to reports in the Telegraph. 

The private equity firm, BlueGem, who are behind the revival of the Liberty Department Store, has offered to put in  about £20m for a majority stake.   Sources familiar with the process said that BlueGem, which is run by a team of former Merrill Lynch bankers, needs to persuade HSBC, Mamas & Papas’ main lender, to rollover its stretched borrowings and give the company some breathing space.

For this to work sources have said that they are likely to need to close down around 25 loss making stores.  The company currently has 55 stores.  A company voluntary arrangement (CVA) might be one way that they can slimline the estate.  A CVA will allow the company to determine the liabilities of the shops and so vacate the premises.  Any rent arrears will be bound by the CVA.  

When a company goes into administration, creditors (including employees, contractors, HMRC and lenders) will be owed money. There is a specific order to this, known as order of priority. See our infographic for more information

Mamas and Papas has been hit hard by the growth of online retailers and supermarkets who are now selling their line of products.  

Kiddicare, another childrenswear retailer, is also in talks to be rescued. Currently owned by Morrisons, the supermarket giant is looking to offload Kiddicare after a brief but disastrous ownership. 

UPDATE: 27th August - It's been revealed Mamas & Papas is looking to propose a CVA deal with landlords across 60 stores. 50 to 90 jobs are at risk at its head office. Deloitte will be overseeing the process with a creditors meeting taking pace on the 10th September. If 75% of creditors (by value) approve, the CVA will go ahead. They are also looking to half rents on its stores and move to monthly payments.

Daniel Butters from Deloitte commented, "The proposed CVA will allow the group to revise lease terms and proceed with its wider restructuring plan. The proposals put forward offer the best possible solution for Mamas & Papas (Retail) Limited and all of its stakeholders in comparison to the likely alternative outcomes".

UPDATE: 10th September - Today at the creditors meeting, the CVA with landlords was approved. Chairman of Mamas & Papas had this to say: 

"This is an important milestone for us. The proposals agreed today not only enable us to cut costs and ensure a profitable retail portfolio but will also create a platform to allow us to continue offering innovative, premium products to customers in the UK and internationally, both in stores and online."

Good news for all involved as the company has been able to avoid administration.