Lenders for Matalan are to take ownership of the fashion chain in a deal which will end founder John Hargreaves’ control of the retailer.

A group of lenders, led by Invesco, Man GLG, Napier Park and Tresidor, have sealed a debt-for-equity swap to take reins of the fashion business.

The lenders secured the transaction, which is due to formally complete on January 26, after Matalan launched a sales process in September.

It is understood the lenders did not believe any offers from the sales process adequately valued the business.

Mr Hargreaves, who founded the company in 1985, attempted to put a bid together with Elliot Advisers to regain control.

The lenders said they have cut the group’s debt by £257 million to £336 million and agreed up to £100 million in new growth funding as part of the deal.

They added that the move will help to support the future of its “stores, logistics network and website”, pledging that these areas are “unaffected directly” by the recapitalisation.

On Monday, Matalan also revealed that sales grew by 14.6% over the peak December trading period as against the same period a year earlier.

However, the company warned that recent profits have been “adversely affected” by challenging market conditions and its purchasing plan for the autumn/winter season.

Matalan said stock levels for the autumn “proved to be too ambitious and front-loaded”, resulting in £45 million extra inventory in September against the previous year.

It said trade came further under pressure due to a “very slow start to the season as warm weather stifled demand and the cost of living crisis unsettled consumers”.

The group therefore invested heavily in discounting to stimulate further demand which it said impacted profitability further, amid continued cost inflation.

Stephen Hill, Matalan chief financial officer, said: “As we transition to new ownership and having worked with John and the Hargreaves family for over 20 years, it would be remiss not to emphasise the contribution they have made to building the great business we have today and the many opportunities that lie ahead.

“On behalf of the Matalan team, I would like to express our sincere thanks and appreciation.

“It is clear in our third quarter and recent trading performance that whilst the market remains challenging, customers have demonstrated a strong affinity to our brand and proposition, evidenced from our robust and ongoing sales growth.

“However, the business must continue to adapt its approach to such market conditions, increasing its level of agility and margin resilience.”