Today Nordic Credit Rating (NCR) has been informed that taxi operator Cabonline Group Holding AB (publ) (Cabonline) has initiated a written procedure in accordance with the terms and conditions of its senior secured instrument (SE0013409398). NCR placed its 'B' long-term issuer rating on Cabonline on Watch Negative on 24 Mar. 2020. The written procedure requests amendments to the terms and conditions of the instrument, also rated 'B', in line with the issuer rating.
Specifically, the written procedure requests to:
- amend existing leverage maintenance covenant tests, with Cabonline seeking a waiver to pause tests for the 6 quarters starting Q2 2020 and a delay of the step downs in the leverage ratio by 6 quarters. This proposed change reflects that Cabonline expects to breach the covenant on 30 June 2020 and is uncertain in its ability to meet the requirements given varying Nordic responses to the COVID-19 pandemic and the lasting impact on 12-month EBITDA.
- adjust various terms, including events of default and release of security, in order to allow for the reorganisation of its Finnish business and subsidiaries (Cabonline Finland Oy, Kovanen Yhtiöt Oy, Mankkaan Taksi Oy, Kuljetusliike Kajander Oy, Tilaus 24 h Oy and Kovanen Taxi Oy).
It is important to note that neither of the proposed amendments fulfils NCR's definition of default or distressed exchange which would result in a 'D' rating as outlined in our Rating Principles, 16 Sep. 2019. While a breach of covenants is a technical default, NCR does not consider a breach of covenants as sufficient for assigning a 'D' rating unless it is accompanied by a bankruptcy filing.
The Watch Negative on the issuer rating signals that there is a high likelihood that we will lower the ratings in the next three months. We are continually evaluating Cabonline's financial and operating position and following negotiations with its direct and indirect employees, creditors and owners. We expect to resolve the Watch Negative by 24 Jun. 2020.
Bondholder votes on the proposal are due 14 May 2020 and require a two-thirds approval from holders of at least 50% of the outstanding nominal amount. We note that Pareto Bank, counterparty to Cabonline's Super Senior RCF, has already agreed to waive the relevant terms to allow the reorganisation of the Finnish business.
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