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FirstGroup agrees easier banking covenants
9th Nov 2020 07:38
(Sharecast News) - FirstGroup has arranged less onerous banking covenants for the next year to give it more flexibility during the Covid-19 crisis.
The bus and rail operator said its banks and private placement lenders had agreed that net debt could be less than 5.5 times earnings at the end of March and 4.5 times in September 2021 compared to 3.75 times normally. At both testing dates the fixed charge covenant will be more than 1.0 times compared to 1.4 times normally.
Net debt including rail ringfenced cash will not exceed £2bn during the period and FirstGroup will keep minimum liquidity of £150m, it said.
Britain's biggest bus company has been battered by the Covid-19 crisis, which has caused passenger numbers to plunge at its rail and bus services. It has continued trading with the help of the UK government after swinging to a first-half loss.
FirstGroup said it expected to meet its covenant tests for 30 September 2020 and that it continued to expect a small adjusted operating profit for the first half of the current year. The company's shares, down by almost two-thirds in 2020, rose 6.2% to 48p at 08:40 GMT.
"However, whilst the board is confident that the balance sheet is now robust in a range of downside scenarios, as a matter of prudence the group determined that it is an appropriate point to secure enhanced financial flexibility from its lenders for the next two covenant testing dates, covering the typical period of twelve months," FirstGroup said.
Free cash before rail ringfenced cash and undrawn committed banking facilities remained "broadly stable" at about £810m on 6 November, the company said.
"The group will continue to take all prudent and appropriate action to ensure that it emerges from the pandemic in the most robust position possible in order to best serve our communities and deliver on our strategic plans," FirstGroup said.
The bus and rail operator said its banks and private placement lenders had agreed that net debt could be less than 5.5 times earnings at the end of March and 4.5 times in September 2021 compared to 3.75 times normally. At both testing dates the fixed charge covenant will be more than 1.0 times compared to 1.4 times normally.
Net debt including rail ringfenced cash will not exceed £2bn during the period and FirstGroup will keep minimum liquidity of £150m, it said.
Britain's biggest bus company has been battered by the Covid-19 crisis, which has caused passenger numbers to plunge at its rail and bus services. It has continued trading with the help of the UK government after swinging to a first-half loss.
FirstGroup said it expected to meet its covenant tests for 30 September 2020 and that it continued to expect a small adjusted operating profit for the first half of the current year. The company's shares, down by almost two-thirds in 2020, rose 6.2% to 48p at 08:40 GMT.
"However, whilst the board is confident that the balance sheet is now robust in a range of downside scenarios, as a matter of prudence the group determined that it is an appropriate point to secure enhanced financial flexibility from its lenders for the next two covenant testing dates, covering the typical period of twelve months," FirstGroup said.
Free cash before rail ringfenced cash and undrawn committed banking facilities remained "broadly stable" at about £810m on 6 November, the company said.
"The group will continue to take all prudent and appropriate action to ensure that it emerges from the pandemic in the most robust position possible in order to best serve our communities and deliver on our strategic plans," FirstGroup said.