Financial Covenants Analysis

Global financial covenants analysis and research with a focus on the largest and most complicated capital and corporate structures.

Papa John’s Secured Debt Allowance Analysis
Tue Sep 14, 2021 7:25 pm Distressed Debt  Financial Covenants Analysis

Analyzing the Papa John’s secured debt, our Americas Covenants team took a look at the company’s new unsecured notes, leverage-based restricted payments and investment baskets accessible at issuance with 2.5x, 2.75x headroom. After launching $400M of senior unsecured notes due 2029, the company is expecting to repay in full their existing term loan and revolving credit facilities.  Also, with plans to amend their credit facility, Papa John’s secured debt allowance is likely to increase. The amendments to their credit agreement will increase revolving commitments from $400M to $600M and extend the maturity for an additional five-year term.

Click through for our full analysis of the Papa John’s secured debt allowance as well as our discussion on the company’s secured debt capacity, value leakage, quarterly dividends, gross leverage ratios, flexibility under the new notes and more:

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Leveraged loan lender protections weakening continues…

Written by Peter Washkowitz, Senior Director and Head of Americas Covenants ||

The dog days of summer did not slow down activity in the bankruptcy and restructuring world.

In the United States, August came to a close with a mix of real estate, healthcare and consumer services companies filing chapter 11, including Tix Corp., Brown Industries, Regional Housing & Community Services Corp., Advanced Tissue and New England Sports Village.

After the reduction of revolving commitments under its asset-backed lending facility in the wake of a pipeline leak at the Inglewood Oil Field, E&B Natural Resources may seek a replacement for the facility, while restructuring negotiations between Glass Mountain Pipline’s major stockholders have recently begun to gain momentum.

Meanwhile, with Ion Geophyiscal’s $7 million of 2021 notes maturing on Dec. 15, market participants continue to speculate on how the company will fund the notes’ repayment. Reorg’s Americas Covenants team has provided an updated tear sheet analysis of the credit, which is linked to below.

As fall is fast approaching, the prevalence of weak lender protections in the leveraged loan market appears to be running full steam ahead. Throughout the summer months, new credit agreements for publicly owned sponsored companies continue to include loose covenants and aggressive terms that provide significant flexibility to incur additional first lien debt, transfer assets to unrestricted subsidiaries and pay dividends. (more…)

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ION Geophysical Tear Sheet, Distressed Exchange Analysis
Tue Aug 31, 2021 6:21 pm Financial Covenants Analysis

Providing an updated ION Geophysical tear sheet in addition to a detailed covenants analysis, our Americas Covenants team dove deep into the company’s exchange offer and rights offering pursuant where the company exchanged an aggregate principal amount of $113.5 million for a combination of cash, stock and new 8.000% second lien convertible notes due 2025. These exchanges resulted in changes to the ION Geophysical capital structure and leverage metrics and despite the April 2021 exchange, approximately $7 million of Old 2L Notes remained outstanding as of June 2021.

Our updated ION Geophysical tear sheet and covenants analysis includes a deep dive into the notable features of the company’s new 2L convertible notes including the conversion mechanics, make whole mechanics, Series A Preferred Stock, and more. Click through for our full analysis on the updated ION Geophysical tear sheet:

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Industry continues to grapple with chip shortages

Written by Noor Sehur, Analyst Team Lead || With a quiet primary market amid the earning season, we shifted our focus to secondary situations in Europe, some of which are auto-parts suppliers Adler Pelzer and Standard Profil, German real-estate company Adler Group and Indian-based entertainment company Eros STX.

Yields of B- rated senior secured notes of Adler Pelzer and Standard Profil rose to 5.2% and 7.3%, respectively, as the industry continues to grapple with chip shortages and margin pressure from rising raw material costs. (more…)

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Lamb Weston Debt Covenants Analysis – Americas Covenants
Mon Aug 23, 2021 5:20 pm Financial Covenants Analysis

After amending both of their credit agreements in August 2021, the Lamb Weston debt covenants have become increasingly more complex. The global producer, distributor and marketer of value-added frozen potato products ended their fiscal year with a 10.5% decrease in their adjusted EBITDA, plus the amendments to their credit agreement increased the revolver from $750 million to $1 billion extending its maturity. Our Americas Covenants experts provided a deep dive analysis into the amendments to the company’s credit agreements as well as how these amendments impact the Lamb Weston debt covenants, financial covenants, collateral and guarantee suspension period, secured debt capacity, restricted payments and investments, senior note purchases and more.

Click through for our expert analysis, covenant conclusions and full capital structure on the Lamb Weston debt covenants:

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Carrols Restaurant Group Covenants Analysis

Following their June refinancing, our Americas Covenants experts have updated their tear sheet to provide more color on our Carrols Restaurant Group covenants analysis. The company operated 1027 Burger King restaurants and 65 Popeyes as of July 4, 2021 and after issuing $300M of 5.875% senior unsecured notes they were able to fully repay their $74M outstanding incremental loans. After their refinancing transactions in June, Carrols Restaurant Group’s first lien net leverage ratio fell to 1.36x from approximately 3.40x. 

Click through and read our full Carrols Restaurant Group covenants analysis including our conclusions on the company’s liquidity and financial covenants, debt and liens, dividends, investments and prepayments and their open market purchase of notes:

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AZEK Company Debt Covenants Analysis – Americas Covenants

After completing its IPO in June 2020, the AZEK Company debt covenants and capital structure have become more complicated. The company’s gross profit increased 23.3% year over year at the end of Q2 2021 and during Q2, AZEK amended both its term loan and ABL facility to decrease pricing. Their springing financial covenants show that they must maintain a fixed charge coverage ratio of at least 1x, plus their debt and lien capacity shows that permissions from their term loans, ABL, and their unsecured debt are making an impact on the company’s leverage ratios. 

To read our Americas Covenants team’s full analysis on the AZEK Company debt covenants as well as our conclusions about the company’s restricted payments and investments, IPO proceeds and term loan prepayments as well as their pro rata sharing and lien subordination amendments click through here:

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Litigation, Regulatory and Chapter 11 Restructuring Trends

The ever-growing subscriber base for Reorg in the Americas has long enjoyed premium content, including our coverage of legal and financial analysis as well as reporting of performing, stressed and distressed credits. Part of our “secret sauce” is Reorg’s trifecta approach, which combines experienced reporting with the expertise of seasoned financial analysts and lawyers. This results in more than the sum of its parts, as it provides customers with an unmatched holistic perspective.

In recent months, the Americas team has been busy covering the litigation, regulatory and chapter 11 restructuring spaces. Chapter 11 filing frequency in the beginning of the second half of the year is off to a similar start as the first half but with a more balanced distribution across sectors and with less of an emphasis on consumer discretionary and real estate filings. Recent chapter 11 filings that have garnered substantial interest include the freefall bankruptcy of oil refinery Limetree Bay Refining and the chapter 11 filings of two Latin American companies: Colombian consumer financial services business Alpha Latam Management and Chile-based Corp Group subsidiary holding company Corp Group Banking, which also filed with its subsidiary Inversiones CG Financial Chile Dos SpA.

In-court action has also been hot, including the recent disclosure statement approval in the Puerto Rico Title III cases and the decision in Mallinckrodt disallowing approximately $203 billion of the $213 billion in private Acthar antitrust claims filed against the debtors. Our litigation and regulatory coverage has also been active, with highlights including coverage of the ongoing drama between the state of Florida and the U.S. Centers for Disease Control relating to the CDC’s cruising regulations and of the recent House Judiciary Committee hearing on “Confronting Abuses of the Chapter 11 System.”

Additionally, Reorg’s reporter team broke the news on July 28 that Berkeley Research Group has been appointed as Novalpina’s third party manager as NSO continues its attempt to raise up to $400 million, which it could use to buy out Novalpina, the holder of a controlling stake in the Israeli spyware company. As always, Reorg looks forward to continuing to deliver leading, timely coverage of market-moving situations. We’ll be taking a break next week, back Wednesday, August 18.

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Intralot Debt Analysis, 2024 €500 million 5.25% Senior Notes

Analyzing the Intralot debt and their 2024 €500 million 5.25% senior notes, our EMEA Covenants team discusses the Northlight and Bardin Hill entities who met on Monday, August 2, 2021 in front of a New York Court in order to challenge the exchange on the company’s debt that has been proposed. The noteholders claim that the 2021 debt exchange violates terms of the 2024 notes and are calling the Intralot debt exchange a ‘Sweetheart Deal’. Reorg’s review of the 2024 notes indenture covenants, published in January by EMEA Covenants, highlighted that the proposed transaction could face litigation. Reorg analyzed the group’s ability to circumvent 2024 noteholder opposition by moving Intralot Inc. out of the 2024 notes restricted group and releasing its guarantees.

To read our full analysis of the Intralot debt as well as their grounds for filing, click through here: 

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Analyze and Forecast Cash Flow with Aggredium

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