Matalan has entered the Lloyds Banking Group’s special measures division.
Matalan has long been in financial difficulty: just a few years ago it issued nearly £500m in bonds in order to help refinance its operation. In 2014 it raised its credit facility with Lloyds from £30m and issued a further £492m in bonds in two tranches that will not mature until 2019 and 2020.
This is not to say that Matalan has hit a new low. A banking source told The Times that Matalan may have entered the support unit of Lloyds for “all manner of reasons”.
“There is a perfect storm in retail and, if you have a reasonable amount of debt and market conditions are very challenging, then frankly you need to make sure you are getting your product right all the time. I would expect all businesses in the sector are re-examining closely how they run.”
While certain agencies have reduced their rating of Matalan in recent months, at Moody’s it remains the same.
That being said, there are certainly ongoing signs of deterioration at Matalan. During the Christmas period ending January 2, online sales fell by 50.9% to £2.7m, despite the general growth in online consumer shopping. In its Q2 results Matalan issued a second profit warning when its earnings fell by a full 90% to £2.3m, though this was largely a result of issues at the company warehouse in Liverpool.
Whatever its reasons, Matalan’s entry into the special measures division will open it up to increased observation and scrutiny. In the event that speculation on Matalan’s further decline can be firmly proven or disproven, it will come under the spotlight with little delay.
Could this be one of Matalan’s last chances to turn things around?