Redgroup Retail, operator of bookstore chains Whitcoulls and Borders, is talking to its financiers in a bid to get a waiver from an expected breach of banking covenants in August.The company said that following consideration of its most recent management
Redgroup Retail, operator of bookstore chains Whitcoulls and Borders, is talking to its financiers in a bid to get a waiver from an expected breach of banking covenants in August.
The company said that following consideration of its most recent management accounts, the board has formed the view that the company is likely to breach two out of three of its banking covenants when they are tested on August 28.
"Like many retailers, the company has experienced a tough trading environment, particularly in Australia, in the last quarter," REDgroup Retail said.
The board at this stage expects earnings before interest, tax, depreciation, and amortisation, for the purpose of testing banking covenants, of around $25 million for the financial year ending August 28.
This company has annual cash interest payments of approximately $9 million for the financial year ending August 28.
REDgroup said it has commenced discussions with its financiers to seek a temporary waiver of covenants and will update the market as and when appropriate.
REDgroup Retail reported a first-half profit after tax of $19.5 million, up from $10.7 million in 2009.
The company has been working to integrate and restructure its three brands Whitcoulls, Angus&Robertson and Borders to yield cost savings.
REDgroup Retail is owned by private equity firm Pacific Equity Partners (PEP).
PEP acquired the A&R Whitcoulls Group from United Kingdom retailer WH Smith in May 2004. It also acquired the Australian, New Zealand and Singapore operations of Borders Group International. In December 2008 the A&R Whitcoulls Group was re-branded as REDgroup Retail.
