Bird & Bird has taken a lead role in advising London listed client, Mothercare plc, and its wholly owned subsidiary Mothercare Global Brands, on a major restructuring and refinancing.The specialist retailer of mother and baby products announced on 5 November that it was placing its UK trading subsidiary, Mothercare UK Limited, into administration, resulting in the closure of all of the group’s UK retail outlets. However, the innovative structure for the transaction has resulted in a transfer of the profitable international franchise operations of Mothercare UK to a sister company, Mothercare Global Brand, immediately following administration. This was accompanied by a transfer of the group’s liabilities to its existing pension schemes to the continuing Mothercare group. While it has not been possible to save the UK retail operation, the transaction has avoided an insolvency of the wider group and prevented the pension schemes moving into the Government’s Pension Protection Fund (which would have been damaging to pensioners as well as continuing staff). The transaction should see the group’s banks repaid in full out of the liquidation of the UK business’s residual stock, allowing the listed PLC to continue as a specialist franchise operator, free of bank debt. Furthermore, the jobs of employees involved in the international franchise business have been saved. It is hoped that in due course, a UK franchise partner may emerge to preserve the Mothercare brand on the UK’s high street and the group is discussing this with a number of parties. As part of the transaction, Mothercare PLC is raising additional funds through a placing of new shares by Numis Securities to help fund the transitioned business.
The Bird & Bird team is advising Mothercare plc and Mothercare Global Brands on the transaction. The team is being led by corporate partner, Simon Allport who is advising on the transaction structure and equity fundraising elements. Restructuring and Insolvency partner, Joss Hargrave, and senior associate Claire Barker, are advising on the restructuring issues and the transfer of the international franchise business out of administration. Franchise partner, Graeme Payne (assisted by legal director Shelley Nadler), has been co-ordinating an extensive exercise in the novation of franchise contracts with franchise partners across over 40 international jurisdictions.
Other firms involved in the transaction include Kirkland Ellis LLP (advising Mothercare UK and the administrators), Sackers LLP, Mayer Brown and ARC Pensions Law (advising on pensions matters), Simmons & Simmons (advising Numis on the equity fundraising) and DLA and Allen & Overy (advising on banking matters).
Commenting on the transaction, Simon Allport said “We have been working with Mothercare’s management team for several months on a variety of structures seeking to preserve the Mothercare Group in what is an increasingly difficult environment for UK retailers. Whilst it is a shame that the UK retail operations are closing down, we are delighted to have helped the group in achieving its core objective of preserving the wider group (positioning it as a viable franchise specialist) and achieving the best outcome for as many stakeholders as possible, particularly the pensioners”.
