Matalan has confirmed it is one step closer to securing £50 million in additional funding from existing stakeholders to help mitigate the financial impact of COVID-19 on the business.
The funding comprises of a £25m revolving credit facility from the Coronavirus Large Business Interruption Loan Scheme (CLBILS) from two of its banks, and £25m from existing bondholders via a newly issued note.
Bondholders will need to consent to the funding arrangement by 5pm on 3 June, whilst the CLBILS funding will need to be paid back by 31 December 2020.
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.
In a statement, a spokesperson for the company said: “Matalan announced that it was assessing a number of alternative options to raise additional funding. This funding is required to enable Matalan to manage the short-to-medium-term cashflow impacts following the temporary loss of store revenue arising solely from the direct impacts of COVID-19.
“Matalan believes the terms of the additional funding are, in combination, the most attractive sources of additional liquidity available at this time.
“Should the consent solicitation fail, the deliverable financing alternatives are likely to be significantly less attractive to holders of the Notes. Matalan believes 33% of holders of the Notes have already indicated that they intend to deliver their consents.”
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.
Matalan has since been permitted to re-open 15 stores across the country after the Government relaxed non-essential retail rules to allow homewares stores to open from 18 May.