Matalan founder Hargreaves faces new battle with lenders over chain’s future | Economic news

The Matalan founder is bracing for another battle with the retailer’s lenders over his property ahead of the £350m debt refinance deadline.

Sky News has learned that John Hargreaves, who reinstated himself as chairman of Matalan last month, has in recent days offered to pump tens of millions of pounds into the business.

Under the plan, Mr Hargreaves and his family would retain absolute control of the company he founded in 1985.

City sources, however, said over the weekend that some of Matalan’s major creditors were likely unconvinced by the proposal and were preparing to push for the fashion and homewares chain to go up for sale.

It was unclear exactly how much Matalan family shareholders were offering to inject into the company, although there were suggestions on Saturday it could be between £25m and £50m.

A person familiar with the process said there had been no formal discussion of a sale and the lenders had not formally rejected Mr Hargreaves’ proposals.

A £350m bond is due to be repaid in January, while another £130m instrument is due to be repaid a year later.

In June, Matalan also secured a £60m revolving credit facility as it sought to strengthen its balance sheet ahead of what threatens to be a prolonged slump in consumer confidence.

Based in Liverpool, Matalan employs 11,000 people and operates in 230 UK stores.

It also operates an e-commerce platform and has more than 50 overseas franchise stores.

The company claims to have 11 million customers.

It was unclear at the weekend what valuation any sale process would achieve in the current economic environment, or whether Matalan bondholders themselves were preparing to take ownership of the company.

A sale process that took place against Mr Hargreaves’ wishes would be “certain” to undermine the value of the business, according to a retail manager who worked for Matalan.

Like many of its peers, the chain has found its finances severely strained by the pandemic, prompting Monaco-based Mr Hargreaves to provide substantial financial support.

In recent months, global inflationary pressures have weighed on margins, while supply chain challenges have impacted inventory availability.

Matalan warned earlier this summer that its “ability to successfully refinance our debts involves geopolitical, economic and market factors beyond the company’s direct control.”

Its latest trade update, for the 13 weeks to May 28, showed a healthy recovery in sales to £286.5million from £221.8million the previous year.

Upon his return as Chairman, Mr Hargreaves, who replaced Steve Johnson, said: “My belief, passion and commitment to our business is stronger than ever and I look forward to maximizing our growth potential, alongside the leadership team, delivering true omnichannel value to our customers.”

The Hargreaves family is advised by Lazard, while Perella Weinberg Partners advises senior – or senior – lenders.

Matalan declined to comment on Saturday.

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