Lenders are preparing to take ownership of British home goods and fashion retailer Matalan.
Invesco, Man GLG, Napier Park and Tresidor are among the key lenders that agreed to exchange 150 million pounds ($183.9 million) of debt for equity in Matalan, the Financial Times reported. They also plan to inject up to 100 million pounds ($122.6 million) in new capital into the company.
“Having been one of the investors who supported Matalan with additional financing during the Coronavirus pandemic, Invesco is now pleased to play its role in this transaction by ensuring that the debt burden carried by the group will be very substantially reduced,” the Matalan investor said. “Present market conditions are challenging for many retailers, but Matalan is a large and successful business with clear strategic objectives and many compelling growth opportunities. Our firm, and the other First Lien Noteholders who are backing Matalan, have huge confidence in the prospects for the business.” Invesco has been an investor in Matalan for over 10 years.
The deal is expected to close near the end of January and will leave Matalan founder John Hargreaves out in the cold after he started the company in 1985. The budget fashion and homewares retailer operates about 230 stores across the U.K. and is expected to keep workers in their jobs when the deal closes.
The development serves as a blow to Hargreaves, who has been scrambling for ways to keep control of the company. He quit as board chair when Matalan went up for sale in September so he’d be able to bid on the retailer.
Related Stories
“My intention is to be instrumental in positioning the business for long-term success,” Hargreaves, who had teamed up with private equity firm Elliott Advisors for a joint bid to buy Matalan, said at the time.
For Hargreaves, the pending deal isn’t just loss of control. He’s also expected lose the equity the family owns in the business. His loan of 50 million pounds ($61.3 million) to Matalan in June 2020 likely will not be repaid, since it’s considered junior debt. And the a separate debt around 18 million pounds ($22.1 million), classified as second lien debt, is even lower on the financial totem pole, meaning that it gets wiped out.
Hargreaves last summer was considering injecting another 25 million to 50 million pounds ($29.5 million to $58.9 million) into the business to avoid having to put up the “For Sale” sign. Sources said he was advised against making the investment.