JJB Sports chief faces further talks on loans

Published on Saturday 14 February 2009 12:32

SIR David Jones, executive chairman of JJB Sports, will be forced back into emergency talks with lenders even if he successfully offloads the embattled retailer's fitness club chain, analysts are warning.

Jones saved the entire group from imminent administration on Friday when he successfully renegotiated a payment extension on its estimated 60m of debt. The extension is subject to the successful sale of its 54 fitness clubs, valued by the City at about 50m.

Jones is hoping that the sale of the clubs will secure the retail chain's immediate future, which has looked in doubt since last year.

But analysts already fear that even if the clubs do reach the expected asking price, JJB will still have a difficult job of securing its lenders' ongoing support.

David Stoddart of Altium Securities suggests that after fees are added, JJB will still have debts of as much as 30m and it will have a tough time persuading its lenders HBOS, Barclays and Kaupthing to provide facilities to meet its ongoing capital requirements.

He warned that in the current environment of diminishing high street sales, banks are reluctant to extend extra support to retailers.

Stoddart said: "The question is, can they persuade the banks their plans will pay down any residual debt and also be able to cover any ongoing capital requirements it has. I'm not surprised we are still in a position where the banks appear to be only making support available on a contingent basis."

JJB's founder David Whelan, who left the firm in 2007, is reported to have expressed an interest in the clubs. Billionaire sports tycoon Mike Ashley, owner of rival Sports Direct, has also been linked with the sale.

Jones is under pressure to convince lenders that he has a recovery plan capable of securing JJB's long-term future. It is this year expected to report a loss of as much as 10m.

Last week, JJB said it is preparing to put its subsidiary businesses Qube and the Original Shoe Company into administration if a buyer cannot be found within days.