Friday, February 22, 2019

Matalan wins breathing space to address debts


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.