Businesses suffering plunging revenues because of Covid-19 are seeking to avoid potential debt breaches by substituting last year\u2019s profits in place of this year\u2019s in the documents they present to their lenders.<\/p>\n
The UK pub chain Punch Taverns, US events group Live Nation Entertainment and Samsonite, the Hong Kong-listed luggage maker, are among companies employing the tactic, according to filings and people familiar with the moves. The strategy amounts to asking lenders to imagine that the pandemic had not happened, but debt holders have so far accepted it because acknowledging depressed 2020 earnings could cause problems on both sides.<\/p>\n
\u201cConceptually I\u2019m not fine with it; it doesn\u2019t make any sense,\u201d said one Punch bondholder. \u201cBut I don\u2019t have any incentive to fight against the company and to push [it] down a messy path.\u201d When companies breach terms known as covenants \u2014 such as a requirement to stick within certain ratios of debt to earnings \u2014 lenders are normally at liberty to demand immediate repayment, or in extreme cases trigger restructurings and take control of business assets….<\/p>\n
Read it all<\/a>.<\/p>\n The entire economy is going full Enron, booking revenue they never made to borrow more money they can’t repay: Ebitdac – earnings before interest, tax, depreciation, amortisation and coronavirus.https:\/\/t.co\/vp4ljVv5qi<\/a><\/p>\n \u2014 Leo Weese \u7345\u8349\u5730 (@LeoAW) June 18, 2020<\/a><\/p><\/blockquote>\n\n