Laura Ashley agrees emergency funding deal with Wells Fargo

Laura Ashley has staved off the threat of imminent collapse after securing access to sufficient funds to meet its immediate funding needs.

The clothing and furnishing retailer said talks with the US bank Wells Fargo over the terms of a £20m loan facility had concluded successfully.

How to save Laura Ashley: relaunch all its beautiful vintage dresses

“The group should be able to utilise requisite funds from its working capital facility with Wells Fargo to meet its immediate funding requirements,” Laura Ashley said.

It comes two days after the business announced its main shareholder, the Malaysian investment firm MUI Asia, was in last-ditch talks with Wells Fargo over the business’s future.

The retailer revealed the talks after reports appeared in the press over the weekend, but on Monday it denied claims that MUI Asia would put money into the business to help it stay afloat. It had been unable to access some of the funds after restrictions on the £20m loan arrangement kicked in.

On Wednesday the company reiterated that MUI was not putting up any cash. “As previously announced, this is not a cash injection by MUI Asia Ltd into the group,” it said.

Its shares clawed back some of the losses they had incurred earlier in the week, rising 15% to 1.9p on Wednesday. However, they are still well below Friday’s closing price of 3.25p, before the talks were revealed.

The breakthrough comes after a difficult year for the retailer, which has 2,700 employees and 155 stores. In August the business announced it had swung to a £14m loss in the year to 30 June, compared with a £100,000 profit the year before.

Months earlier, Flacks Group dropped a potential £20m bid for the company after Laura Ashley’s board rejected its advances. The Manchester-based private investor did not reveal why it had retreated approximately a month after expressing its interest.

Laura Ashley said the offer, which valued the business at 2.75p per share, did not reflect the value of the brand.

However, Cavendish Asset Management, Laura Ashley’s third-largest shareholder with a 1.7% stake, raised concerns about the Wells Fargo deal. “It’s good news for the company in the short term but it might not hold up for long,” said Nick Burchett, a fund manager at Cavendish.

He said the company needed to focus on its vintage styles and luxury image now it had breathing room, “otherwise it could be curtains for another well-known high street name”.

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