It has been widely reported that Dixons Stores Group International (DSGi) the owner of Currys, Dixons and PC World is tasking for further cash investment from investors.
DSGi has seen its net borrowings more than triple in around five months, partly because a tightening in trade credit insurance had prompted it to accelerate payments to some suppliers.
The UK-based consumer electronics retailer made the disclosure as it confirmed a £311m placing and rights issue.
Shares in the retail group gained 14.7 per cent following the announcement of these plans.
Analysts said investors were relieved at the survival of DSG and encouraged by signs of a rise in UK consumer confidence.
However, the group said in a trading update that like-for-like sales continued to fall in the second half, down 11 per cent across the business.
The UK and Ireland electricals division saw comparative sales slide even further (down 12%) while like-for-like sales in UK computing slumped 14%.
DSG, whose shares shed almost 90 per cent of their value last year on weakening trade and concerns about its finances, said it would raise £210.6m in a deeply discounted rights issue and £100m in a share placing.
Chief executive John Browett said the group had also renegotiated its £400m bank facilities to raise the pace of its store renewal programme, and “emerge from the consumer downturn in a stronger position”.
DSG, which has seen profitability rise by as much as 65 per cent under new store formats, now expects to convert up to 150 outlets in the current financial year and up to 215 next year.
The group announced in March that trials of its new format stores had been successful and it would extend the programme.
At that point Browett said DSG could fund its “renewal and transformation” plan without the need to raise extra funds.
Mr Browett has denied the cash call amounted to a volte face, saying: “When I made that statement in March the exact words I used were ‘in theory we could get through’.
“However, our view was that we were taking unnecessary risk with the balance sheet and therefore, given the strength of the results out of the new stores, that we would be able to actually raise some equity.”
Increased payouts to suppliers has pushed net debt up to £502.9m in the 26 weeks to 18 April, the group said yesterday.
It has made earlier payments to suppliers due to lower availability of trade credit insurance, which covers the suppliers against DSG not being able to pay.
Browett added: “The refinancing also leaves us well placed to provide reassurance to our trade suppliers and their credit insurers with regard to the group’s capital position.”
DSG expects underlying pre-tax profits for the year to 2 May to be “not less than” £42m ““ a fraction of last year’s £205.3m haul.
A string of UK firms have been forced to tap shareholders for extra cash in recent months, although DSG is the first major retailer to go cap in hand.