Billionaire owner of Matalan seeks £60 million cash as closures bite

STRUGGLING fashion retailer Matalan, run by the billionaire Hargreaves family, is considering options to secure ‘short term funding’ of as much as £60million to help it through the coronavirus pandemic.

The company circulated a statement to its bondholders yesterday, following enquiries from The Mail on Sunday, in which it said it had not faced ‘such difficult and unpredictable times’ in its 35 years of trading.

It said it had been forced to close 232 stores and had subsequently ‘bolstered our liquidity by drawing down fully against our existing revolving credit facility having never before done so’.

The company, which has furloughed staff but continues to sell clothing online, said: ‘Matalan operates with strong financial discipline and had a healthy level of liquidity prior to Covid-19, enabling a considered review of the need for further measures following the closure of our stores.’

It has drafted a number of forecasts to assess the impact of ‘different societal lockdown periods’ on its financial position.

‘In addition to further management action, some of these scenarios include the potential introduction of short term funding in excess of the existing revolving credit facility and as such we are exploring multiple options.’ Sources told the MoS it is seeking between £50million and £60 million after a flurry of conversations over the past week.

Founder John Hargreaves, the son of a Liverpool docker, acquired his clothing giant back from shareholders in 2006 for £817million. In 2010 he paid himself a £250million dividend after refinancing the firm with around £525million of debt from bondholders. Last year he won a battle with HMRC after convincing courts an £84million bill should not be paid because it was too historic.

The dispute related to the sale of around £230million of shares in Matalan in May 2000 shortly after he had declared himself a resident in tax haven Monaco.

One source told the MoS that earlier this year Hargreaves discussed with his children a plan to sell the business at some point, although this remains unconfirmed and now looks unlikely in the foreseeable future. The length of the lockdown for large chains remains uncertain but senior retailers said even their most optimistic forecasts would see shops remain closed until ‘well into’ May.

A raft of restaurant firms have gone bust and several larger retail chains are said to be on the brink. It comes amid a rapidly escalating dispute between retailers, restaurants and their landlords over whether mounting rental bills accrued during lockdown must be paid.

Solvent and insolvent companies are understood to be waiting for clarity from the courts over the issue and staving off decisions over how to prepare for the next stage of the crisis until they get legal assurances.

Rent demands could tip some firms over or mean those in administration may need to be completely wound up.

Peter Saville, an insolvency specialist at AlixPartners, said: ‘The Government has said these outlets have to close. So the question for the courts is: I’m not in occupation and I’m not in a position to pay the rent, but I don’t want the landlord to take the lease back. Can you confirm that I don’t have to pay rent during the lockdown and at the same time keep hold of the lease?’