In a last ditch attempt to save itself from collapse, sports retailer JJB Sports plans to approach investors for fresh cash infusion of £30 million.
The sports retailer had raised £100 million in a rights issue 12 months ago. The cash strapped company issued a warning stating that it was ‘likely’ that the company will breach ‘loan covenants’ – terms of agreement based on which banks issue loans, like maintaining certain liquidity and solvency ratios. It also indicated that it is ‘exploring further business restructuring options’ and looking out for “alternative sources of finance”.
It transpired yesterday that JJB has reached a deal wherein it will be able to raise another £30 million and an announcement to that effect may happen anytime soon.
Investors of the company, including Microsoft Chairman Bill Gates’ charitable foundation is understood to be considering the call for fresh capital but have laid preconditions for the same. The board members will be reshuffled and the first one to exit will be John Clare, a career retailer who spent 22 years with the Dixons. A former director at the Cable & Wireless, Mike McTighe – better known for his financial acumen but with limited retail exposure, will replace Mr. Clare.
It is understood that investment firm Crystal Amber has assured to back the fund raising exercise in return for a board seat. The company holds 15 percent share in JJB Sports.
The company has seen a lot of turbulence in recent years. It came under investigation from the Serious Frauds Office (SFO), the office of Fair Trading and the Financial Services Authority (FSA). In October it was fined £455,000 by the FSA for providing inadequate information to investors regarding its trading performance in 2008.
The newly appointed CEO Keith Jones – he took over seven months ago, is trying hard to turn the business around. However, he was forced to issue a profits warning last month – which may deteriorate further due to freezing and inclement weather, hampering the festive sales season. Jones issued another warning earlier this month stating that trading conditions remain challenging and the company may be forced to breach the covenants of a £25 million loan.