NCR has a 'CCC' issuer rating on Cabonline and its outstanding senior secured bond. The rating is on Watch Developing. We expect to resolve the Watch placement within the next 10 weeks.
The following is a summary of Cabonline's first quarter results and does not reflect a rating action.
Quarter results partially affected by COVID-19
Cabonline reported revenues of SEK 1.4bn in Q1/20, down 6% from SEK 1.5bn in Q1/19, with organic growth reduced by 13.8%. The adjusted EBITA margin of 3.1% is at the same level as FY 2019, but down from 4.1% in Q1/19. With 12 month rolling adjusted EBITDA/net debt of 5.8x, the company was well within the leverage maintenance covenant as of 31 Mar. 2020. As the COVID-19 effect was first visible during March, we expect the covenant to be under pressure for Q2/20. Cabonline had SEK 317m in liquid assets as of 31 Mar. 2020 having fully drawn the revolving credit facility of SEK 125m. Negative equity has increased to SEK -333m as of 31 Mar. 2020, from SEK -269m at year-end.
Increasing pressure into second quarter
Cabonline reports a significant drop in demand for its services, resulting in significantly reduced EBITDA prospects for Q2/20. The company has entered into new agreements regarding home delivery, transportation services for health personnel and COVID-19 tests, as well as utilising relevant government support systems for both the company and its franchise takers. Despite its efforts, the company is in discussions with bondholders with the aim of receiving a covenant holiday, or adjusting the current covenant, for the leverage maintenance test. The company expects to finalise these discussions during third quarter 2020. The company reports Q2/20 and the corresponding compliance certificate 20 Aug. 2020.
This commentary does not reflect a rating action.
If you have any questions, please contact:
Mille O. Fjeldstad, credit rating analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com