Matalan seeks extra cash as it prepares for post-Covid-19 future
May 11, 2020
The Monaco-based retail entrepreneur is thought to be keen on securing a government-backed loan to help his business through the Covid-19 crisis.
But after placing more than 11,000 employees on the government's Job Retention Scheme, there are question marks over whether the retail magnate should be allowed to have access to more state-backed funding.
Since closing all 232 UK stores, Matalan has deferred rent payments and paid suppliers just 70% of their bills for April, May, June and July, according to the Sunday Times.
In the year to February 2019, the business enjoyed pre-tax profits of £30 million on sales of £1.1 billion, but the coronavirus crisis has had a damaging effect on sales. Matalan has fully drawn its £50 million of credit facilities, and without a cash injection, the company could run out of money by the summer.
According to sources close to the brand, banks will provide a loan only if they will be among the first in line for repayment should the company go bust. That would require approval from bondholders, which have drafted in advisers from investment bank Perella Weinberg and law firm Kirkland & Ellis.
Matalan has £480m of bonds in issue, with £350m maturing in 2023 and £130m in 2024. CreditSights analyst Neill Keaney told The Sunday Times that a more drastic restructuring of the balance sheet was a matter of “when” rather than “if”. A debt-for-equity swap or pre-pack administration could be on the cards for the business, he added.
Meanwhile, Matalan is focusing on preparing its shops for reopening. Given the large size of its stores and their out-of-town format, the retailer could find it easier that its high street rivals to operate in a Covid-19-compliant way. And store sales are crucial for the business, generating as much as 85% of annual revenues.
The company’s low prices could see it become a frontrunner in the tough times ahead, but only if Matalan’s future is secured.
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