Matalan has been placed into its bank’s special measures division for struggling businesses as concerns grow over its weak trading.
The retailer has been put into Lloyds Banking Group’s business support unit, which was set up to help troubled companies.
Matalan warned on profits last month as sales plummeted over Christmas. It revised full-year earnings to between £54m and £56m. This follows a previous reduction in EBITDA guidance to between £60m and £65m in October.
It is understood that Matalan began discussions with Lloyds to request temporary amendments to its covenants.
The request triggered Lloyds’ decision to move it to its special support unit, although its banking terms remain unchanged.
It is thought that Matalan was not in any immediate danger of breaching its covenants but was “acting prudently”, according to one source. Its cash deposits are understood to be greater than the revolving credit facility it holds with Lloyds.
Matalan managing director Jason Hargreaves, son of founder John Hargreaves, said last month that the extremely mild weather over December had hit footfall and increased discounting across the market.
However, its online sales plunged 51% over peak, which Verdict Retail analyst Nivindya Sharma said was down to logistical problems in its new Liverpool distribution centre, which hindered online availability.
Less than two years ago Matalan issued a £500m bond to refinance and to fund a £250m dividend to John Hargreaves, one of the biggest payouts in UK retail history.
No comments yet