River Island’s Urgent Move: Secures Financing to Prevent Bankruptcy

British fashion company River Island is on the verge of collapse. To avoid it, its investors would have to accept a restructuring plan involving the closure of 33 stores and a reduction in rents. In addition, the company needs an injection of ten million pounds ($13.5 million) by mid-September.

If the plan to reduce rents is not approved, the company warns that it will run out of cash by the end of August, with an inability to pay its debts. In addition, it indicates that its capital requirement may amount to fifty million pounds ($67.7 million) by mid-year, The Guardian advances.

River Island believes its problems are subject to “a sharp rise in the cost of doing business in recent years”. British households have reduced spending on non-essential items, such as clothing, to “offset rising prices for everyday items” such as food.

River Island warns it will run out of cash by the end of August and will not be able to pay its debts

The company said it had secured £40 million ($54.1 million) in new funding from the investment vehicle of the Lewis family, which founded the business and still controls the majority of River Island.

Blue Coast Capital is River Island’s largest lender, with outstanding debts amounting to 270 million pounds ($365.6 million). It would have agreed to a moratorium on interest payments and to defer the repayment date of its existing debts from 2027 to 2028.

River Island posted losses of 33.2 million pounds ($44.9 million) in 2023, according to its most recently filed accounts, following a drop in sales of more than 19% to 578.1 million pounds ($782.9 million). In 2022, it made a profit of 2 million pounds ($2.7 million).

River Island, formerly known as Chelsea Girl, began selling clothes in the 1940s.