Finance chiefs are asking lenders to waive some financial requirements or give them additional flexibility in how they account for coronavirus-related expenses so their companies don’t violate loan terms, the Wall Street Journal reported. Many companies have suffered severe declines in revenue and earnings amid the coronavirus pandemic, hurting balance sheets and potentially resulting in violations of loan and debt agreements, or covenants. Those terms can include hitting certain financial targets — for example, the ratio between net debt to earnings before interest, tax, depreciation and amortization, or Ebitda — and holding a specific amount of cash as reserve. Companies usually have to prove to their lenders on a regular basis they still meet those requirements. A consortium of 21 banks agreed to waive the covenant test until December 2021 for Cimpress PLC, said Sean Quinn, its chief financial officer. The Ireland-based owner of marketing and customized products provider Vistaprint raised $300 million in capital at the end of April. Cimpress previously discussed a waiver without raising capital, but decided the funds would provide it with more flexibility in negotiations. “Bringing in that capital allowed us to have a different set of discussions with banks,” Mr. Quinn said. Nearly 100 other public companies, including cinema operator Cinemark USA Inc., clothing retailer Hanesbrands Inc. and casino operator Wynn Resorts Ltd., through May 15 pursued waivers or amendments to existing loan agreements, according to Moody’s Investors Service, which tracks companies that have disclosed these changes in filings with securities regulators. Banks and other lenders are scrutinizing the long-term viability of businesses applying for changes to their terms on a case-by-case basis, said Ted Swimmer, head of corporate finance and capital markets at Citizens Financial Group Inc. “There is no playbook, but we are trying to get companies through this situation that is not anybody’s fault,” Swimmer said. At the same time, the bank is managing its own risk exposure, he said. “Businesses that were in trouble before the pandemic might not make it through to the other side.”
