Low & Bonar waives covenants, may access additional facilities

By Sarah Lizee

Olympia, Wash., March 27 – Low & Bonar plc announced amendments to its financing arrangements, including a further temporary waiver of its financial covenants, and, if required, access to additional facilities.

The company had agreed to amendments to its financing agreements in October, waiving the financial covenants which were due to be tested as at Nov. 30, in order to assist the company in progressing both its turnaround plan and the recommended cash acquisition of the company by FV Beteiligungs-GmbH.

Under the amendments, the financial covenants would have been reinstated and tested within 14 days of the offer lapsing or being withdrawn with respect to the financial position as at the previous month-end.

The scheduled covenant test for May 31 would have occurred in any event.

The company said that, in light of trading performance, as well as a challenging outlook, were the financial covenants to be tested in line with the previous amendments, it was very unlikely that the company would have been able to comply.

The only key remaining condition to the acquisition is competition approval from the European Commission in phase one.

“Whilst a decision from the EC on this is now expected by April 17, there can be no certainty as to its outcome at this time,” the company said in a press release.

“In light of this, and taking into account recent trading performance and outlook, also now affected by the further uncertainties relating to economic conditions caused by the Covid-19 virus, the company has engaged further with its lenders, seeking to ensure that should the offer lapse, or be withdrawn, the company will have a stable financial platform to allow alternative strategic options to be pursued.”

On Friday, the company agreed to further amendments to facilities with its lenders so that the financial covenants that could have been required to be tested at some point in the period to May 31 have been waived until Nov. 30 and will not be reinstated if the acquisition lapses or is withdrawn.

In addition, the company's lenders have agreed to make available to it additional facilities of £12 million which had been draw-stopped under the terms of previous waivers, and agreed to defer repayment of a loan of RMB 70 million that was due to be repaid in June.

The company is required to ensure that it has a certain minimum liquidity in terms of cash and available facilities for forward-looking 13-week periods during the period to Nov. 30 in respect of the new facilities and the company will be unable to draw on these additional facilities if it is unable to comply with the liquidity requirement at any time.

The company has also agreed to certain covenants in respect of the ordinary course operation of its business.

Low & Bonar has agreed to provide appropriate security to the lenders for the additional facilities and to provide guarantees for repayment from some of its subsidiaries. The facilities will only become available once that security and those guarantees have been put in place, which is expected to take place over coming weeks and only in the event that the acquisition lapses or is withdrawn.

The amended facilities also contain the following changes to the pricing of the main borrowing facilities:

• If the acquisition lapses, there will be a payment in kind uplift to the margin applying depending on leverage;

• If the acquisition lapses, the company will pay an amendment fee to the lenders and an additional amendment fee will be paid as an exit fee upon repayment of the facilities; and

• Upon drawdown of the new facility, the company will pay a further arrangement fee to the lenders.

Low & Bonar is a performance materials company based in London.

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