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JJB likely to breach banking covenants

JJB Sports has said it is likely it will breach its banking covenants as trading conditions have remained challenging and like-for-like sales remained below expectations.

The struggling sports retailer, which issued a profit warning last month, said it is “likely that it will breach certain financial covenants in the £25m revolving facility provided by Bank of Scotland when they are next tested at the end of January 2011”.

It said the company is actively engaged in constructive discussions with Bank of Scotland and its advisers in relation to testing these financial covenants and more generally, in relation to the future financing of the business.

It said trade has been further exacerbated by the current adverse weather conditions.

JJB said: “At this stage, with two months of important trading remaining before the year end, covering the pre-Christmas and New Year Sale periods, the outlook for the full year remains uncertain.”

It said trading at its six revamped stores is “encouraging” with sales 11% above the company average.

The retailer said again that it is exploring further business restructuring options and is considering alternative sources of finance.

JJB said the Bank of Scotland has “welcomed the steps taken by management and continue to be supportive”.

Peel Hunt analyst John Stevenson said he believes “an equity fundraising will be needed to secure the business in the new year”.

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