Last month, Melrose warned more job cuts are “inevitable” and said it would not pay an interim dividend as revenues plunged and it fell into a loss in the second quarter.
The owner of automotive and aerospace engineer GKN reported that it has agreed amended arrangements with its banking syndicate, which includes improved financial covenants to 31 December 2022 and then revert back to the original covenants.
Improvements include extending the previously agreed waiver of the net debt-to-EBITDA covenant to June 30 next year, and altering the EBITDA-to-net finance charges from 2.5 times currently, to 3.0 times until December 31 next year and then 3.25 times until the end of June 2022 and 4.0 times through to December that year.
These amendments cover all the group’s primary borrowing arrangements that contain financial covenants, which encompasses a committed £3.2bn revolving credit facility repayable in January 2023 and a committed term loan of circa £0.9bn that can be extended to April 2024 at Melrose’s option.
Melrose also has a £450mln bond maturing in September 2022 and a £300mln bond maturing in May 2032, neither of which contain financial covenants.
“Melrose is grateful for the continued support of its lending banks which means that it has the flexibility it needs to continue to focus on cash generation and adapting the group to current market conditions,” the FTSE 100 group said, adding that there is a “modest” cash cost to secure the amendments but no change to previously agreed interest rate calculations.
The company pointed out that it has passed the covenant tests for 30 June 2020 and “would not in fact have needed the net debt: EBITDA waiver granted previously”.
Published at Tue, 04 Aug 2020 06:53:00 +0000-Melrose arranges tweaks to financial covenants out to December 2022