FirstGroup PLC (FGP) has agreed amendments to its debt terms with its banks and bondholders for the next year, which it insisted was “a matter of prudence”.
Having said that it expects a small operating profit for the first half of year and so safely bypass its upcoming debt covenant tests, the train and bus operator’s board said it “is confident that the balance sheet is now robust in a range of downside scenarios”.
However, directors feel it is prudent that “it is an appropriate point to secure enhanced financial flexibility from its lenders for the next two covenant testing dates”.
Covenant amendments have now been agreed for the March 31 and September 31 tests in 2021 “on similar terms”, with net debt:EBITDA covenant lifted from 3.75 times normally to less than 5.5 times and then 4.5 times for the March and September tests respectively.
It has been agreed that net debt including ring-fenced cash for the rail division will not exceed £2.0bn, while minimum liquidity levels of £150mln will be maintained during this period.
Free cash, before rail ring-fenced cash, and undrawn committed revolving banking facilities were £810mln as at November 6, compared to £850mln at the end of June.