Melrose Industries PLC (LON:MRO) has issued an update on financing.
Following the trading updates on 30 March 2020 and 22 July 2020, Melrose has now agreed amended arrangements with its banking syndicate including improved financial covenants to 31 December 2022. Beyond that date the Group reverts to the original covenants for the balance of the facilities’ term. These amendments cover all the Group’s primary borrowing arrangements that contain financial covenants.
The Group’s committed c.£3.2 billion revolving credit facility is repayable in January 2023 and the Group’s committed term loan of c.£0.9 billion can be extended to April 2024 at Melrose’s option. In addition to these committed banking lines the Group has two bonds: a £450 million bond maturing in September 2022 and a £300 million 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 new financial covenants have been designed to give Melrose considerable headroom and flexibility.
There is a modest cash cost to secure this amendment but there is no change to previously agreed interest rate calculations. Melrose has passed its covenant tests for 30 June 2020 and would not in fact have needed the net debt: EBITDA waiver granted previously.
The improved financial covenants are shown in the table below:
| Financial Covenant | 31 December 2020 | 30 June 2021 | 31 December 2021 | 30 June 2022 | 31 December 2022 |
| Net debt :EBITDA | Waiver* | Waiver | 5.25x** | 4.75x** | 4.0x** |
| EBITDA :Net finance charges | 2.5x | 3.0x | 3.0x | 3.25x | 4.0x |
*Announced on 30 March 2020
**Subject to downward adjustments upon certain material disposals
Following 31 December 2022, the financial covenants revert to 3.5x (for net debt: EDITDA) and remain at 4x (for EBITDA: net finance charges).
Simon Peckham, CEO of Melrose Industries PLC, said:
“We have now put in place new amended arrangements with our banks that last until the end of 2022. We thank our banks again for their continued support which gives us the headroom and flexibility to continue to focus on cash generation and adapt the Group as needed. Melrose also retains over £1 billion of cash liquidity. We are confident that we can position the Group to produce good returns for Shareholders.”
