Nordic Credit Rating (NCR) notes that taxi operator Cabonline Group Holding AB (publ) (Cabonline) has announced proposed changes to the terms of an outstanding senior secured bond (SE0013409398).
The proposed amendments are now subject to a bondholder vote, no later than 22 Jul. 2020. The proposals require an approval vote of 66 2/3% and the support of at least 50% of the bondholders.
NCR placed its ratings on Cabonline on Watch Developing on 7 May 2020 (see NCR lowers long-term rating on Cabonline Group Holding AB (publ) to 'CCC'; ratings on Watch Developing). The bond is rated 'CCC', in line with the issuer rating.
Cabonline said in a statement on 2 Jul. 2020 that it had reached an in-principal agreement with certain bondholders reflecting 60% of the adjusted nominal amount of the bond in respect of terms and conditions. On 3 Jul. 2020, bond service provider Nordic Trustee issued a formal notice of written procedures, seeking amendments and waivers to the bond on Cabonline's behalf.
The proposals include:
- a waiver of leverage maintenance covenants on test dates occurring during the period 30 Jun. 2020-30 Sep. 2021 and amendments to the ratios stipulated for subsequent test dates, specifically to 7.00:1 for 31 Dec. 2021, 6.75:1 for 31 Mar. 2022, 6.50:1 for 30 June 2022, 6.25:1 for 30 Sep. 2022 and 6.00:1 for 31 Dec. 2022;
- the introduction of a monthly maintenance liquidity test based on the average liquidity position of the Cabonline group (including cash and available commitments under a super senior revolving credit facility agreement) during the month in question which shall not be less than SEK 125m. This covenant is to be tested at the end of each month until and including Sept. 2021 and reported within 10 business days following the last day of the respective calendar month;
- an increase in the interest rate payable on the bonds by 1.00 pp per annum, provided that any increased interest accrued during the period when the new liquidity covenant applies is in the form of payment-in-kind interest; and
- flexibility to enable restructuring of certain parts of the company's Finnish operations.
Under the proposed amendments, private equity provider H.I.G. Capital, Cabonline's main shareholder, would, if necessary, commit to providing the company with a secured loan of SEK 140m, ranking pari passu with the bond and with a capped margin (including fees and interest) of 5%. In addition, bondholders would receive a "consent fee" equal to 0.5% of the nominal amount of the bond on a pro rata basis.
The proposed amendments would not constitute a distressed exchange as defined in Nordic Credit Rating – Rating Principles, published 16 Sep. 2019.
In our base case scenario, we expect Cabonline to renegotiate its covenants successfully, ensuring the company's going concern status and creating sustainable headroom under the revised maintenance covenant. We further expect the owners to show greater willingness to support Cabonline with an equity cure to maintain liquidity. In addition, we expect the company's drivers to obtain government support where available.
We are continually evaluating Cabonline's financial and operating position, and will closely monitor bondholders' response to the latest proposals.
We expect to resolve the Watch placement by 7 Aug. 2020.
This commentary does not constitute 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
research Issuer comment Corporate Cabonline Group Holding AB (publ) Corporate