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Furniture retailer MFI said last night that its management team had secured financial backing from current owner Merchant Equity Partners to complete a buy-out of the business, which has been struggling to raise finance in recent months. CEO Gary Favell said the deal meant it would be ‘business as usual’ for the ailing chain, which is good news for customers and for its 2,500 staff. He even suggested that sales had been better than expected in recent weeks - although we imagine that expectations weren’t very high...

With consumer spending slowing down rapidly, and the housing market seemingly in freefall, this isn’t exactly a great time to be in the home furnishing business. So MFI, which was once Britain’s biggest furniture business before the likes of Ikea and Tesco started eating its breakfast, has been really suffering in recent months. And its financial situation created a vicious circle: when it’s common knowledge that you’re struggling to pay the bills, customers are unlikely to commit thousands of pounds up front for a new fitted kitchen that may never appear.

That’s presumably why Favell and co have funded this deal via Merchant Equity Partners, the retail buy-out specialist that bought the struggling MFI business for a nominal £1 two years ago and has since spent millions trying to revitalise the brand. MEP has agreed to provide a 'cash dowry' (rumoured to be about £25m plus working capital) to the management team, which will allow it to address its most pressing concern: paying a £19m quarterly rent bill that’s due today. But although this may look like MEP is paying someone to take MFI off their hands, it’s insisting that it has actually made a return on its investment.

Favell is certainly making all the right noises, as you’d expect: he says MFI is a ‘fantastic business... and with the large amounts of capital injected over the last two years, we have worked hard to improve service levels and the retail experience for our customers’. He even talked about raising its game further by increasing the 'number and quality’ of the concessions it has in store. And he does have the advantage of running a brand that’s been around for  in the UK since 1964 (albeit staggering from one near-death experience to the next in recent years).

But he’s going to have a tough job turning things around in the current climate: retailers are struggling across the board, and homeware is going to be hit harder than most. This buy-out may save the MFI brand in the short term, but there’s likely to more bad news on sales and jobs in the coming months...

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