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I recommend investors buy Matalans (MTNLN) 9.625% r Notes due!"!#"2$# at &9!.5$ 'or a yield to maturity o' ##.$%. I believeMatalan can areciate to 9.625 in a year* +ivin+ investors an I,, o'#6.$%. Matalans bonds s-ould areciate as t-e comany benets'rom lo/er cotton rices* better inventory mana+ement and an

increased 'ocus on its ladies/ear se+ment. Matalan benets 'rom anall bond caital structure and -as no maturities until 0ril 2$#6. Inaddition* t-e business -as lo/ cae1 reuirements and Matalan -as+enerated ositive 'ree cas- 3o/ every year since #99* /it- t-ee1cetion o' 2$$!. Lease ad4usted levera+e is -i+- at 6.61 (5.91 net)*but I ro4ect Matalan /ill use its 'ree cas- 3o/ to delever and end 2$#!/it- levera+e o' 5.91 (5.21 net). or investors t-at are more risaverse* t-e Matalan .5% r ecured Notes due 7"9"2$#6 at &99.25rovide a +ood oortunity. T-e yield to maturity is less t-an #$% at9.!#%* -o/ever* I believe investors can earn an I,, o' #!.!$%* overt-e ne1t year. Levera+e on a lease ad4usted basis is 5.71 and you

benet 'rom bein+ -i+-er u in t-e caital structure.

Matalan is a value clot-in+ retailer /it- t-e 8s lar+est ort'olio o' outo' to/n stores. T-e comany currently oerates over 2$$ stores t-atavera+e :!$*$$$ s 't. T-e comany -as a #$.#% s-are o' t-e ;

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Matalans core customer is a !$J year old 'emale /-o visits Matalanre+ularly to buy roducts 'or -ersel'* -er 'amily* and -er -ome and is'rom t-e lo/er middle class or silled or unsilled /orin+ class. T-ecomany -as a -i+- conversion rate and believes t-at 6$% o' its

customers /-o visited a store /it-in t-e ast year made a urc-ase.In addition* t-rou+- its Matalan Kard* t-e comany maintains adatabase o' ## million active customers or # in ! 8 -ouse-olds.Matalan actually -as t/o diCerent cards. >ne* a

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+ot its romotions /ron+. Matalan ut its roducts on sale in t-erin+* a'ter t-eir cometitors* contributin+ to a 'all in traOc.

T-e overall value clot-in+ and -ouse/ares se+ments are verycometitive and t-e level o' romotion is very -i+-. In t-e value

clot-in+ maret* Matalan cometes a+ainst t-e suermarets suc- as00 and Tesco in t-e @;oodA roduct cate+ory and ot-er valueretailers suc- as =rimar in t-e @

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Matalans unsecured bonds s-ould be able to trade u to &9.625 'orseveral reasons. Mar+ins s-ould start to imrove as mana+ement is'ocused on drivin+ mar+in imrovement 'rom better buyin+ t-rou+-total control o' uantity* desi+n* and uality. Mana+ement also lansto e1and e1istin+ brands /-ile +ro/in+ ne/ ones. inally* cotton

rices -ave receded and t-is s-ould -el to drive increase in mar+ins.Go/ever* t-e bi++est s/in+ 'actor is liely to be mardo/ns.

Matalan benets 'rom a beni+n maturity sc-edule /it- not-in+ dueuntil 0ril 2$#6 /-en its ;

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;iven Matalans levera+e* investors are comensated 'or t-e risscomared /it- ot-er 8"Huroean retailers. Go/ever* as Matalansmar+ins start to stabilie and +ro/* t-e +a s-ould narro/. In addition*+iven t-e comanys liuidity and 'ree cas- 3o/ +eneration* s-ould t-ecredit marets continue to rally* investors /ill loo to comanys suc-

as Matalan in a +rab 'or yield* -elin+ to us- u rices. Investors /-obuy Matalans 9.625% r Notes due 2$# at &9!.5$ can e1ect to earnan I,, o' #6.% over t-e ne1t year as Matalans bonds areciate to&9.625

H1-ibits

ummary inancial =ro4ections ('ull model available uon reuest)

,elative Qalue