Matalan debt climbs on latest investor update

Matalan Ltd. debt is bid higher today after the U.K. retailer released strong Christmas trading numbers and said it is assessing options with respect to refinancing its substantial debt pile.

The company reported revenue of more than £291 million for the 13 weeks ended November 2021, a jump of 16% compared with the same period in the prior year, and reported revenue up 8% for the crucial five-week festive trading period, with sales surpassing £130 million for the period ended Jan. 2.

Profits for the peak festive trading season were more than £30 million, and more than £61 million for the 13 weeks ended November 2021.

The retailer’s £350 million of first-lien secured 6.75% notes due 2023, which are callable at par in February 2022, this morning edged closer to their call price, changing hands in a 97.5/98.5 context according to market sources, up roughly 1.5 points from the close on Jan. 14. The company also has close to £28 million of 16.5% priority first-lien secured notes maturing in June, which it placed privately with existing bondholders in 2020 as part of a wider consent solicitation process to bolster liquidity.

Today's higher bond prices follow a significant rally in the company’s debt in the last month as refinancing has looked more achievable amid positive reporting from U.K. retailers. The company's 2023 notes began the year trading at about 93 pence in the pound.

Executive Chairperson Steve Johnson said in a statement this morning that the company is "continuing to evaluate alternatives and monitor market conditions with respect to a potential refinancing of its outstanding indebtedness."

He said disruption in U.K. logistics and labor markets had added significant costs for the company and hampered the availability of products; however, Johnson also said the retailer saw further growth in its online offering, which now accounts for an annual online turnover of more than £200 million.

Further out on its debt curve, Matalan's £130 million of 9.5% second lien notes maturing 2024 are up in a 76/77 context according to market sources, which is more than three points higher from Friday's close. These notes are also callable in February 2022, but at a premium of 102.375.

Matalan reported a closing cash position of £163.3 million and restated EBITDA guidance of £98 million to £100 million for 2022.