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Matalan must replace £350mn of debt by January to continue trading


Matalan has confirmed that it may not be able to continue operating if it cannot finance a significant amount of its debts by January,
Matalan: “the ability to successfully refinance our debts involves geopolitical, economic and market factors outside the direct control of the business”.
// Matalan acknowledges it may not be able to continue trading if it is unable to finance its debts by January
// The retailer said talks with lenders were “at an advanced stage” and that it believed it could complete the refinancing in time

Matalan has confirmed that it may not be able to continue operating if it cannot finance a significant amount of its debts by January, despite a recovery in trading, Financial Times has reported.

The fashion retailer has already replaced a revolving credit facility and £16.7mn borrowed under the government’s Covid-19 loan scheme with a new £60mn credit facility, and plans to repay £27mn of high-interest loan notes from its cash reserves.

But according to FT, a much larger £350mn tranche of secured debt falls due for repayment early next year and will need refinancing.


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The Liverpool-based business which has more than 200 stores, stated that “the ability to successfully refinance our debts involves geopolitical, economic and market factors outside the direct control of the business”.

This uncertainty “may cast significant doubt on the group’s . . . ability to continue as a going concern”.

Debt markets for riskier borrowers in Europe remain largely stagnant following Russia’s invasion of Ukraine, although there is increased activity in the US.

Matalan previously hoped for debt refinancing back in February but failed to secure  sufficient support.

Unlike those businesses, which were suffering from declining sales and weak margins when they recapitalised, Matalan is trading strongly.

Results for the year to February showed that sales rose 38% to £1 billion in the 12 months to the end of February.

And its pre-tax losses narrowed to just £7.7 million from £131.5 million a year earlier.

Matalan is controlled by the family of Monaco-based founder John Hargreaves, which may make any restructuring simpler.

Hargreaves has already extended financial support to the retailer by buying and leasing back its head office for £25mn.

He has also converted £50mn of its debt into payment-in-kind notes, which allow interest to be rolled up instead of paid out.

Some £27mn of interest has now accrued on these. Even if credit markets do open up sufficiently to allow a refinancing, the backdrop of rising interest rates means the terms are likely to be less generous than the current 6.75 per cent coupon on the senior debt.

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