Matalan raises £525m in refinancing deal

A mooted flotation was pulled and talks on a sale never get off the ground, but discount retailer Matalan showed today there is still plenty of appetite for its debt.

A £525 million refinancing got away this morning, a deal that sees founder John Hargreaves pocket £250 million.

Two months ago Hargreaves, by far the predominant shareholder, called off a sale because offers from private equity bidders didn't meet his £1.5 billion valuation.

Today the company raised fresh debt, including a
£250 million senior secured term loan and a £225 million 9⅝% senior note not due for repayment until 2017.

Analysts said the long-term nature of the debt indicates that investors are comfortable with the strength of the Matalan balance sheet.

A statement said: "The proceeds of the capital raised will be used to refinance the company's existing debt facilities and to finance a distribution to shareholders."

Matalan runs 200 stores, mostly in out of town venues. It reckons it has strong growth prospects in tough economic times given its market position.

Chief executive Alistair McGeorge said: "Demand for the debt was very strong as investors warmed to the unique strengths of Matalan's business model and credit."

Matalan posted a 9.3% rise in like-for-like sales in the 13 weeks to 2 January.