Card Factory has been given an extra month to negotiate with lenders to avoid breaching banking covenants on a £200 million loan.
Bosses had warned the company was set to breach the loan rules by the end of the month following a plunge in sales during the coronavirus pandemic.
But the greetings card retailer said on Friday that its lenders will provide a waiver to the expected breach until February 28 while talks continue.
In a statement, Card Factory said: “We remain in constructive discussions with our banks, and have agreed a process to continue to explore a range of potential solutions, with scope for further extensions to the waivers as this process continues.”
Earlier this month, the retailer revealed that sales fell by 38.1% after its stores were forced to shut completely for 37% of potential trading days because of coronavirus lockdowns.
Its online channels performed “strongly” over the 11 months to the end of 2020, with cardfactory.com reporting 137% growth in like-for-like sales, while its trade sales grew by 63%.
The retailer said at the time that it expected to report a pre-tax loss of about £10 million for the year, compared with a profit of more than £65 million in the previous year.
Card Factory’s announcement came less than 24 hours after rival card-seller Paperchase secured a rescue deal which will save around 1,000 jobs and the majority of stores after tumbling into administration.
However, it said 37 of its 127 stores will shut their doors permanently despite the move.
Administrators revealed that newly formed company Aspen Phoenix Newco, which is backed by Permira Debt Managers, is to take control of the high street retailer.
Meanwhile, online competitor Moonpig is gearing up for a stock market listing later this year in a move expected to value it at more than £1 billion after posting a 135% sales jump in the six months to October as the pandemic drove more customers online.