Matalan has reportedly asked two of its existing lenders, Barclays and Lloyds, to inject £50 million of funding to prevent the business from running out of funds.
Matalan founder and owner John Hargreaves is reportedly reluctant to dip into his own fortune despite the desperate plea for help, according to The Sunday Times.
As the coronavirus pandemic began to hit the UK high street, Matalan appointed advisers from Deloitte to help raise emergency funds, but investors were reluctant because Hargreaves was not willing to invest his own money.
Since being forced to shut its 232 stores in the UK, Matalan has deferred rent payments and offered to pay suppliers just 70% of bills for April-July, with some landlords now launching legal action to reclaim money withheld by the business.
Banks will lend to Matalan under the Coronavirus Business Interruption Loan Scheme only if they will be among the first in line for repayment should the company heads towards bankruptcy.
Matalan has £480 million of bonds in issue, with £350 million maturing in 2023 and £130 million in 2024. Currently it has fully drawn its £50 million of available credit facilities.
The company also pays for around 75% of its goods for re-sale in USD, and as such hedges currency risk deeply and up to two and a half years out. As a result, on entering the lockdown period, the company held forward currency trades of approximately $700m that due to the fall in GBP against USD, are materially in profit.
In the last two weeks Matalan have $105m of now surplus current year FY21 trades and $145m of largely second half FY22 trades, with the immediate liquidity released from these trades totals almost £12m, which the company are able if necessary to release significant further liquidity should it be required.
In a bid to begin improving cash flow to the business, last month the company said in a statement: “The physical scale and layout of our stores means that once we are legally permitted to reopen, we will be able to operate in a safe and COVID-19 compliant way far more easily than many high density, high street clothing retailers.
“We are currently readying our store environment to enable both customers and colleagues to observe social distancing guidelines.”