Matalan founder Hargreaves Faces New Controversy With Lenders About Chain’s Future | Business newsletter

The Matalan founder is bracing for a fresh tussle with the retailer’s lenders over its ownership ahead of the £350m debt refinance deadline.

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

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

However, city sources said by the end of this week some of Matalan’s senior creditors may not be convinced by the proposal and are preparing to promote the fashion and homeware chain to be approved. for sale.

The exact amount Matalan’s family shareholders propose to inject into the company is unclear, although there were suggestions on Saturday that it could be between £25m and £50m.

A person close to the process said there was no formal discussion of the sale and that the lenders had not formally rejected Mr. Hargreaves’ proposal.

A bond worth £350 million is due to be repaid in January, while another £130 million is scheduled to be repaid a year later.

In June, Matalan also secured a £60m revolving line of credit as it seeks to bolster its balance sheet against what risks a prolonged slump in consumer sentiment.

Headquartered in Liverpool, Matalan employs 11,000 people and does business from 230 UK stores.

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

The company claims to have 11 million customers.

It remains unclear at the end of this week what valuation any sale will achieve given the current economic climate, or whether Matalan’s bondholders are preparing to take ownership of the business.

According to a retail executive who used to work for Matalan, a sales process that goes against Mr Hargreaves’s wishes would “certainly” devalue the company.

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

In recent months, global inflationary pressures have dented margins, while supply chain challenges have impacted inventories.

Earlier this summer, Matalan warned that “our ability to successfully refinance our debts is related to geopolitical, economic and market factors that are beyond the direct control of the business.” .

Its most recent trading update, in the 13 weeks to May 28, showed sales rebounding well to £286.5m, compared with £221.8m the year before.

Upon returning as chairman, Mr Hargreaves, who replaced Steve Johnson, said: “My faith, passion and commitment to our business are stronger than ever and I look forward to the utmost. Our growth potential, coupled with our senior leadership team, delivers true omnichannel value to our customers.”

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

Matalan declined to comment on Saturday.