The UK-based department store chain British Home Stores (BHS) has secured a loan from Grovepoint Capital. The latest loan amount is believed to be worth GBP 65 million.
The loan amount is expected to be used for making the ailing department store chain to turn around. The raised funds will be used to expand the number of BHS stores and strengthening the business operations. The turnaround plan also includes rebranding itself from BHS to British Home Stores.
Grovepoint Credit is the specialist lending unit of the London-based Grovepoint Capital. The loan has been approved against security of few stores of BHS. However, retail veteran Sir Philip Green, who sold BHS to a group of financiers in last March for a nominal GBP1, didn't participate in the meeting held on loan agreement.
BHS will use the raised funds to revamp its cafes and restaurants. It'll also set up food departments in majority of its stores. In addition to this, the department store chain has decided to strengthen its online business including upgrade of distributions network.
The ailing BHS has also quarterly rental bills pending. The sources familiar with the development said that the BHS doesn't need these funds to pay rental bills. BHS required immediate cash flow to keep up the operations.
After the rental dues, day-to-day working capital requirements and maintaining the minimum cash reserves are crucial for the department store chain. BHS needs working capital to the tune of GBP85mn.
BHS said that the funding from Grovepoint Credit gives it working capital of over GBP85mn. The company will use raised funds to making turn around in next three years.
The department store chain has also strategized a plan to rebrand itself from BHS to British Home Stores. The turnaround plan also includes modernizing the frontages of shops as well.
The group of financiers, which has bought BHS from Sir Philip, is known as Retail Acquisitions. This group includes several investors, lawyers and accountants. The former racing driver Dominic Chappell is heading the group of financiers.
Chappell said: "All the raised money will be invested in the business. This is a major step forward for BHS. We have a balance sheet with value and so we'll be able to leverage lending off it."
The Retail Acquisitions group has firmed up plans to utilize every penny to support the regeneration of the portfolio of stores. The turnaround plan aims at getting back the iconic British brand its rightful place on the high street.
The department store chain has 171 stores in the UK. Sir Philip has also written off the department store chain's debts as part of the sell-off deal.
It's estimated that it'll take minimum two years to make BHS turn around. Before that, the major challenge for the department store chain would be GBP100-mn pension deficit.
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