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Conviviality must raise £125m or go bust

Beleaguered Conviviality has issued its third profit warning this month and said it faces bankruptcy if it fails to raise £125 million (US$176.8m).

Bargain Booze owner Conviviality is attempting to fend off collapse with a £125m share placing

Following two previous profit warnings and the discovery of a £30m tax bill, Bargain Booze owner Conviviality is aiming to fundraise equity to recapitalise the business.

It has arranged meetings with investors through Investec Bank in a bid to raise £125m via a share placing.

Conviviality said the amount would allow it to settle overdue payments to its creditors, settle the £30m tax bill with HMRC, repay its £30m ‘revolving credit facility’, and provide cash for the work of recapitalisation.

In a statement released yesterday, Conviviality said it “continues to explore other funding alternatives” in case the share placing is not successful. However, if it is unable to raise the funds by some means, the group is “unlikely to be able to trade on a going concern basis”.

If Conviviality is successful in its share placing, the company’s profit is forecast to take another hit, sitting in the range of £45.5m-£46m for the year to 29 April 2018.

The company first announced its EBITDA would be 20% below expectation on 8 March, citing an “arithmetic error” in the forecast for its Conviviality Direct business.

Then, on 14 March, Conviviality announced its had discovered a £30m tax bill due for payment on 29 March, triggering a second profit warning.

The group suspended trading its shares on AIM – a sub-market of the London Stock Exchange – and cancelled an interim dividend payment in a bid to accumulate cash. The shares of Conviviality PLC remain suspended.

CEO Diana Hunter has resigned from the board and non-executive chairman David Adams has stepped into the role of executive chairman. The rest of Conviviality’s leadership team remain in place.

The value of Conviviality – the leading alcoholic drinks wholesaler and distributor in the UK – has tumbled by more than £300m since its first profit warning.

The group owns the Matthew Clark and Bibendum subsidiaries, among others, serving 10,000 customers and more than 23,000 outlets, with more than 2,500 people on its staff.

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