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Pumpkin Patch says equity value eroded after unsuccessful talks with bank, stakeholders

Friday 21st October 2016

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Pumpkin Patch, the embattled childrenswear retailer, says there's virtually no value left in its equity after discussions with its bank were unsuccessful.

In its full-year results published last month, the Auckland-based company told investors that its directors had given an undertaking to the bank that it would put forward proposals by yesterday, Oct 20, although this was later pushed out to Oct. 31. The capital constraints were highlighted in the accounts as a "material risk" to the ongoing viability of the business.

Pumpkin Patch's debt to ANZ Bank rose to $46 million from $39.1 million in the year to the end of July 2016. It posted a loss of $15.5 million in the same period. This morning the company said its efforts with the bank had proved unsuccessful.

"This further work coupled with discussions with the bank and certain key stakeholders has generated substantial uncertainty, which remains ongoing, regarding the company’s future in the context of its current financing arrangements," Pumpkin Patch said in a statement to the NZX. "Shareholders should note that it is highly unlikely that there is any residual value in the company’s equity."

The company expects to complete "further work and discussions with relevant stakeholders" in the next few days and will announce that to the market when an outcome is clear, it said.

In its annual earnings, the directors said the 2016 financial year was the first in a four-year turnaround plan, and "very good progress has been achieved, although this is not immediately apparent from the headline numbers reported." 

The directors warned that the business remained over-leveraged and capital constrained, with "our ability to move forward impacted by the lack of available capital for debt reduction and reinvestment." The board's primary focus was described as assessing what options are "realistically available" to address its position.The shares last traded at 6 cents, having been placed in a trading halt this morning, and have dropped 50 percent this year. Pumpkin Patch was a member of the S&P/NZX 50 Index until October 2013, when it was replaced by petrol station chain Z Energy.

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