Matalan has acknowledged it may not be able to continue operating if it is unable to finance a significant chunk of its debts by January, despite a recovery in trading.
The UK value retailer has already replaced a revolving credit facility and £16.7mn borrowed under the government's Covid-19 loan scheme with a new £60mn credit facility, and plans to repay £27mn of high-interest loan notes from its cash reserves.
But a much larger £350mn tranche of secured debt falls due for repayment early next year and will require refinancing.
The Liverpool-based group, which employs almost 11,000 people and has more than 200 stores, stated that 'the ability to successfully refinance our debts involves geopolitical, economic and market factors outside the direct control of the business'.
This uncertainty 'may cast significant doubt on the group's . . . ability to continue as a going concern'.
Debt markets for riskier borrowers in Europe remain largely dormant following Russia's invasion of Ukraine, although there is more sign of activity in the US. Matalan tested appetite for a debt refinancing in February but did not secure sufficient support.
Bankers acting for Wm Morrison, the supermarket chain that also needs to refinance heavy short-term borrowings arising from its acquisition by a private equity group, have resorted to placing debt privately at a discount because of the difficulty in raising debt on public markets.
Matalan said talks with lenders were 'at an advanced stage' and that it believed it could complete the refinancing before January. It is being advised by restructuring experts at Teneo, who also oversaw the recent prepack administration of Missguided and the complex administration of Sir Philip Green's Arcadia empire.
But two separate groups of creditors have appointed their own advisers and fixed-income analysts said the bondholders could conceivably take control of the business, as happened with New Look and Debenhams.

Questions
1. Explain why refinancing is important to Matalan.
2. Discuss why Matalan is having difficulty refinancing its debt.