Desperate JJB plans second cash call

By Rupert Steiner for the Daily Mail
Updated: 03:08 EDT, 24 December 2010

Beleaguered JJB Sports is working on a plan to tap investors for £30m in a desperate attempt to save itself from collapse.

Torrid times: A boardroom purge is expected at JJB

The struggling sportswear retailer, which was forced to raise £100m in a rights issue just 12 months ago, warned earlier this month that it was 'likely' to breach its loan covenants - the conditions under which banks agree to keep lending it money.

It also signalled it was 'exploring further business restructuring options' and considering 'alternative sources of finance'.

It emerged yesterday that JJB is close to securing a further £30m through another fundraising and an announcement could come as early as this morning.

Investors, which include the charitable foundation of Microsoft boss Bill Gates, are thought to have insisted on a boardroom purge in return for pledging their support for the cash call.

The first casualty is likely to be JJB chairman John Clare, a life-long retailer who served 22 years at Dixons. Mike McTighe, a former director at Cable & Wireless, is being lined up to replace him. A surprise appointment with limited retail experience, he has earned a reputation as an accomplished financial tactician.

It is also thought activist investor Crystal Amber, which has built a 15% stake in JJB, is negotiating a board position, also in return for supporting the fund raising.

A spokesman for JJB refused to comment.

JJB (up 0.3p to 4.30p) has had a torrid couple of years during which it has been the subject of separate investigations by the Serious Fraud Office, the Office of Fair Trading and the Financial Services Authority.

The inquiries relate to the period prior to the arrival of Jones. In October it was hit with a £455,000 fine by the FSA for failing to keep investors properly informed about its trading performance in 2008.

The firm has also been hurt by promotional activity from rival Sports Direct, run by Newcastle United owner Mike Ashley.

Chief executive Keith Jones, who was parachuted in just seven months ago, is attempting a turnaround, having gutted a large chunk of the board.

He issued a profits warning last month and the heavy snowfall and freezing temperatures sweeping the country are likely to further dent sales.

Jones said earlier this month that 'trading conditions remain extremely challenging' and warned JJB was likely to breach the terms of a £25m loan. JJB only made it through last year by cutting a deal with landlords.