Matalan reportedly enters bank’s ‘special measures’ unit

Fashion and lifestyle retailer Matalan has entered Lloyds Banking Group’s ‘special measures’ unit, which was established to help troubled companies.

According to reports in The Times, Matalan approached Lloyds late last year to be placed in the bank’s support unit, as an attempt to secure the relaxation of some of the covenants on its 50 million pounds debt facility at the bank.

A banking source has been quoted in the newspaper as saying that Matalan entered the support unit for “all manner of reasons,” while adding that currently the fashion and homewares retailer had not breached its debt covenants and does not need to make more drawdowns on its facility.

Matalan has been struggling financially for a number of years after it issued nearly 500 million pounds in bonds to help to refinance its operations and to fund a bumper 250 million pounds dividend to John Hargreaves, its founder. The payout remains one of the biggest on record for a British retail company.

Then in 2014, it raised its credit facility with Lloyds from 30 million pounds as part of a refinancing where it issued a further 492 million pounds in bonds in two tranches that will not mature until 2019 and 2020.

There have been ongoing signs of deterioration at Matalan, in November ratings agency Standard and Poor’s lowered its long-term credit rating after stating that the retailer’s capital structure could become “unsustainable over the long term” if it did not restore earnings in the next two years. However, rival agency Moody’s held its ratings steady.

Image: Matalan