AILING retailer JJB Sports today said it had secured key support from its bank and major shareholders as it battles to stave off administration.
The loss-making retailer said investors including the Bill and Melinda Gates Foundation had agreed to back its latest £65 million fundraising, while Bank of Scotland is also prepared to extend £25 million in working capital.
However, the support is conditional on a key vote next week when JJB will ask landlords and shareholders to back controversial proposals to close up to 89 unprofitable stores over the next two years and alter rental payments.
JJB, which today disclosed further sales declines in 2011, has unveiled a new business plan that it hopes will convince creditors and investors to back its plans to build a long-term future.
The turnaround plan involves cutting costs and increasing sales through investing in staff training, upgrading some of its 160 viable stores and improving its ranges.
It has devised plans for three types of stores which will help to tailor its stores to suit their location and will stock more exclusive ranges such as Slazenger Golf and Run 365.
But the retailer also revealed a 13.5% like-for-like sales decline between January 24 and March 13, although it said the figures were in line with internal expectations.
Wigan-based JJB's move to raise £65 million from investors is the latest in a series of cash calls. It raised #31.5 million from its five biggest shareholders last month, following a #100 million fund raising little more than a year previously.
The proposed company voluntary arrangement (CVA) is also its second in as many years.
It has offered landlords of the stores earmarked for closure a sweetener of up to £7.5 million in cash or shares in two years depending on the performance of the business.
KPMG, which is advising the firm about the CVA, said affected landlords will receive between 25p and 29p for every pound they are owed compared to just 1p if the company falls into administration.
JJB has struggled to compete with buoyant rivals JD Sports Fashion and Sports Direct International, while the demand for cut-price offers has squeezed its margins.
JD Sports last week abandoned plans to make a bid for JJB after claiming its rival refused to provide enough information.
Shares in JJB were down 5% following today’s announcement. Peter Smedley, an analyst at Charles Stanley Securities, said: "We are not convinced given the scale of JJB’s ongoing losses, the funding requirements of its store refurbishment-led recovery, and its working capital needs that this will prove sufficient in the medium-term.
"Current trading attests to the fact that the company remains in a highly perilous situation."