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UK retailer Matalan to file for US bankruptcy protection
[WASHINGTON] UK discount retailer Matalan will file for Chapter 15 court protection in the US on Wednesday as part of broader measures to buttress its balance sheet in the aftermath of pandemic-inflicted closures.
The company will seek "certain interim relief" under Chapter 15 and recognition for its debt restructuring in the UK, according to a statement Tuesday. Chapter 15 of US bankruptcy law shields foreign companies from lawsuits by US creditors while they reorganise in another country.
The retailer used a UK court procedure known as a scheme of arrangement. As part of the deal approved in London yesterday, lower-ranking bondholders agreed to receive more debt as interest instead of cash. The company has £474 million (S$845.6 million) in net debt and as part of the agreement it will obtain £50 million in fresh financing.
The Chapter 15 filing may also trigger the payout of default insurance on the company's notes. There is US$106 million of credit protection outstanding on Matalan's debt, according to the International Swaps & Derivatives Association.
Matalan has been hard-hit by the measures taken to stem the spread of coronavirus. It had to place more than 90 per cent of employees, more than 11,000 people, on furlough during the UK lockdown. The retailer has since unfurloughed more than 5,000, according to a June 5 statement.