Jessops, the 230-store camera specialist, is going to breach its lending agreements as it is incurring heavy losses and auditors are raising doubts over its future.

Jessops is holding talks with banks asking to put in place a new covenant test and restructuring of £57.4m debt. It is considering swapping its debt for equity with HSBC, which has 15% stake in retailer’s shares.
According to Jessop’s executive chairman, David Adams, it is not worth carrying £57m of debt when business was generating only £4m. He informed that company was actively seeking help from HSBC and its advisers for putting future business on stable footing and it was highly likely that this would involve restructuring of debt.
That Jessops was faced with very difficult situation was evident from auditors’ statement that restructuring conditions of bank facilities were indicator of material-uncertainty which would put big question mark on company’s and group’s ability to run business.

When questioned whether company was at risk over the next year, Adams replied that there was good possibility but was not very sure about it. He warned that company had good market position and a viable business model, but its priority task was to address the balance sheet.

Jessops registered loss of £19.1m before tax for the year ending September 2008, compared to £9.3m in 2007. Its total loss after tax touched £50.2m.