Shop Direct secures cash injection from Barclay brothers
today Nov 14, 2019
Shop Direct has confirmed it will receive a £150m injection from its parent company to face a cash crunch triggered by an unexpected surge in payment protection insurance (PPI) claims.
The funding will come in the form of a £75m equity injection before the end of November, although the retail group insisted it has no short-term liquidity requirements.
Alternatives are still being reviewed for the second tranche of £75m, including both equity and debt financing options.
The funds come from the company’s parent shareholder, Shop Direct Holdings Limited, which is controlled by billionaire brothers David and Frederick Barclay.
Shop Direct, which owns fashion e-tailers Very.co.uk and Littlewoods.com, raised the alarm last month after seeing an unexpected surge in PPI compensation requests ahead of a deadline set by the Financial Conduct Authority.
“Whilst the group has no immediate need for funding, £75 million will shortly be invested in the business by way of equity injection from SDHL into Shop Direct, demonstrating the continuing support and commitment of our parent company,” Shop Direct said.
The company added that because it has no immediate need for funding, “we are continuing to work with our financial advisers to evaluate alternative financing options for the £75 million that will initially remain undrawn.”
The cash injection comes amid speculation that the Barclay brothers are looking to sell parts of their business empire, in a move that could also affect Shop Direct. Perhaps making a reference to the rumours, Shop Direct said that the funding “demonstrates investor support for our proven operating model”.
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