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JJB Plunges as Poor Sales May Lead to Breach of Bank Covenants

Dec. 2 (Bloomberg) -- JJB Sports Plc, an unprofitable U.K. sporting-goods retailer, plunged in London trading after saying poor sales mean it is likely to breach some banking covenants.

The shares fell as much as 33 percent, the steepest decline since Jan. 19, 2009. That reduced the company’s market value to 25.4 million pounds ($39.7 million), compared with more than 1 billion pounds when the stock reached a record in November 2001.

Sales have remained below forecasts since the company last updated investors on Nov. 11, Wigan, England-based JJB said today, adding that tough conditions are likely to be made worse by the freezing weather currently gripping the U.K. The company said it’s likely to fail a covenant test on a 25 million-pound Bank of Scotland loan facility at the end of January.

“Shareholders should be braced for a heavily dilutive rights issue to keep the company alive,” Nick Bubb, an analyst at Arden Partners in London, wrote in a note today.

JJB said it’s exploring “further business restructuring options” and considering alternative financing sources.

The shares were down 0.83 pence, or 14 percent, at 4.95 pence as of 9:28 a.m. They peaked at 418.8 pence in 2001.

To contact the reporter on this story: Paul Jarvis in London at pjarvis@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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