Wed Jul 27, 2022 7:51 pm

​​​​Over nine years, the Reorg team has analyzed thousands of performing and distressed credits. Our expert team of financial analysts, legal analysts and journalists produce granular capital structures, primary analysis, tear sheets, waterfall models and more.

With long and deep connections to credible sources, we publish up-to-the minute news to help you stay ahead. In this case study, we’re highlighting one example showcasing the ongoing credit insights that Reorg’s team provide day in, day out to enhance efficiency and improve decision making for more than 25,000 investors, advisors and lawyers.

Matalan: British out-of-town fashion and homeware retailer Matalan and its creditors have appointed advisors as the group seeks to address looming debt maturities. Reorg’s financial analysts, lawyers, and journalists have been following the topical credit since 2015. While the group has managed to refinance its near-term super senior maturities, the first lien and second lien bonds are set to mature in January 2023 and 2024, respectively. Reorg’s financial analysts and restructuring lawyers published in-depth analysis focused on the options available to the group to address its capital structure. 


January 2018

Matalan refinances its senior secured bond debt through issuing £350 million of first lien notes at 6.75% and £130 million second lien notes paying 9.5%. Reorg reported that the books received around £1.2 billion across both tranches, according to sources. Matalan marketed the new debt at 3.8x net leverage. The company retained a £50 million super senior RCF.

April 2020

Matalan said it had fully drawn down its £50 million RCF following the closure of its store estate on March 24 in response to Covid-19 lockdowns. The company said it placed 10,000 employees in furlough and was looking to cut costs and defer capital expenditure whenever possible.

April 2020

Reorg’s lawyers published covenant analysis in response to Matalan’s weak liquidity position – assessing that the company had capacity for £10 million of additional super senior debt and its ability to raise structurally senior debt was hindered by high guarantor coverage of 99.8% based on revenue. Further, Reorg assessed raising senior secured debt was unlikely given the first lien notes were quoted in the 60s.

June 2020

Matalan agreed to £50 million of new money from existing lenders and sought consent from its lenders to incur the new liabilities. It said the funding would enable it to manage the short to medium-term cash flow impacts caused by Covid-19. Matalan also said it would launch an English Law Scheme of Arrangement to switch the cash coupon payable on the second lien notes to PIK, and to subordinate £50 million of the second lien notes currently held by the shareholder.

July 2020

Matalan’s Scheme of Arrangement was passed in the English High Court.

June 2021

Matalan reported results for the fiscal year ending February 2021, which saw revenue decline of 34% year over year to £744.1 million and post-IFRS 16 EBITDA fall 56% to £80.5 million. The company said that RCF lenders had agreed to suspend the net leverage covenant testing on the facility for the second and third quarters of the fiscal year ending 2022. It also said it was assessing options around refinancing its debts due in 2022 and 2023.

July 2021

Reorg journalists reported that investors were expressing diverging opinions on the possibility of Matalan refinancing its debt, with sources divided on whether the company could refinance or need to agree an amend and extend or equitization restructuring deal.

March 2022

Reorg’s financial analysts and restructuring lawyers teamed up to produce an in-depth restructuring options analysis and cash flow model on Matalan. In this piece Reorg examined whether a refinancing was possible and highlighted other options available to address the issues created by Matalan’s capital structure – including amending and extending the first lien and second lien paper coupled with a redemption of the priority notes and a refinancing of the super senior revolving credit facilities.

June 2022

Reorg reports that Matalan had appointed advisors to assist in restructuring options, while its creditors had appointed to advise them in debt negotiations. 

June 2022

Reorg reported that Matalan had agreed terms to refinance its super senior debt, with a new super senior facility provided by Bantry Bay, a joint venture partnership with funds advised by Elliott. The new facility was to pay about SONIA+7%, according to Reorg sources. Matalan also announced it would pay down its £27.7 million priority notes using cash on the balance sheet and options for the remaining bond debt would be evaluated over the coming months.   

Reorg’s view is that Matalan’s high leverage and weak fundamentals, in combination with the current primary market conditions, make a refinancing near impossible without equity support. As an alternative Matalan could negotiate with creditors to agree an amend and extend restructuring plan, or in a more severe case an equitization.

Jacob Parker

Noor Sehur
Director – Head of EMEA Credit Research

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