Matalan - comment

The bonds took a hit yesterday after it emerged that the founder John Hargreaves has lost his long-running court battle with HMRC. His ability therefore to support Matalan may be more limited than otherwise. Apparently, in response, the company published a long Business Update (on our website under Documents) to “summarise” its value proposition. Most of the information published in the document has already been available, but there is extra granularity on measures to combat inflation, its growing online channel and current liquidity. In particular, on the latter point, management are expecting a bigger outflow before year-end than we have modelled, resulting in on average £15m less liquidity at year-end. However, we do not have precise enough a split to say if that merely pulls forward some further outflows that we have anticipated for next fiscal year, so overall the document brings little news. The company is attempting to refinance and we hold positions in the SSNs and 2LNs.