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Law360 (April 20, 2020, 8:43 PM EDT) -- U.K. retailer DFS Furniture said Monday it expects to borrow up to £70 million ($87 million) from existing lenders and may sell additional equity in order to generate cash while the coronavirus pandemic severely restricts its business.
Doncaster-based DFS Furniture PLC said it is in the "advanced stages" of negotiating an additional debt facility with banks that would supplement an existing £250 million lending facility. The additional debt facility would provide the company access to £60 million to £70 million more in cash.
In addition, DFS said it is preparing a potential equity issue totaling 19.9% of its existing share capital. DFS said this transaction would occur in the form of a nonpreemptive equity issue — a stock issuance whereby preemptive rights that grant existing shareholders the right to buy additional company shares in the future before the public do not apply.
DFS — which is listed on the London Stock Exchange and sells sofas, cushions and related accessories — noted that the debt facility would cover near-term working capital until sofa deliveries resume, while the equity issue would strengthen its balance sheet and provide resilience during a "disrupted trading environment."
"The combination of the proposed additional financing together with the operating cost mitigation measures is expected to, when agreed, give the group significant liquidity to see through an extended lock-down," DFS said in a statement on Monday. "The board [of directors] is confident that the group can navigate the COVID-19 crisis and deliver its strategy over the longer term when the trading environment normalizes."
DFS last month closed all of its showrooms and halted manufacturing and distribution operations in the U.K., Ireland and Spain as a result of COVID-19 lockdowns. The company continues to accept customer orders online.
While business is restricted, DFS said it has reduced monthly operating costs following agreements with landlords and suppliers and with government support. DFS said its monthly outgoing expenses are expected to be £14 million less per month until the company's showrooms, manufacturing and distribution operations reopen.
DFS said it plans to restart sofa deliveries "once it is clear there is a safe and workable approach for two-person installations in customer homes."
Counsel information regarding the company's planned debt and equity issuances was not immediately available.
--Editing by Daniel King.
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