Matalan has gained a brief financial reprieve as it continues to struggle with its £500m debt.
Lloyds Bank agreed to reset the covenants on Matalan’s loan agreements, giving the discount clothing chain some much needed breathing space. This comes less than a month after the chain entered Lloyds Banking Group’s special measures division, following a poor quarter of results that the retailer has blamed on tough trading conditions.
The three months ending 2 January found that online sales had plunged by 50.9% to £2.7m, an antithesis to general growth in online shopping at the time. The company called the third quarter “a significant improvement on the first half of the year”, though it still revised its full-year earnings guide.
With this new breathing space the company may have time to adapt to current trading conditions, though it is still weighed down with £500m in debt. Fortunes for the company have flat-lined since founder John Hargreaves carried out a bond refinancing of the company in 2010, hoping to remove a £250m dividend.
In November ratings agency Standard & Poors lowered its long-term credit rating on the retailer, after it was announced that its second quarter had seen a 90% fall in sales. This was largely a results of operational problems at the Matalan warehouse in Knowsley, Liverpool.