RE: Giant squid posting strategy10 May 2022 14:42
Good afternoon @Hexam, from what I remember, CINE waived the covenant tests for the RCF for the entirety of 2021. You are correct that the next RCF covenant test is in June, and CINE mentioned this in the conference call in March.
CINE is only subject to the covenant test in question if more than 35% of the RCF has been drawn upon, which is currently the case for CINE. The plan was to get the RCF paid back so that less than 35% of it was drawn upon, which would mean that no test would take place.
Please see Page 17 of the FY Preliminary results (section: going concern) which I have pasted for your convenience below:
The minimum liquidity covenant (which will not apply if the Group reaches 80% of admission levels for a 3-month comparable period in 2019), net leverage covenant on the revolving credit facility (RCF) and the net leverage covenant on the Rest of the World private placement loan (RoWPP) are the only remaining financial covenants with which the Group is required to comply. The Group is only required to comply with the RCF net leverage covenant when the facility is drawn down by greater than 35%. The Directors are confident that the Group can continue to operate and recover fully from the impact of the pandemic whilst complying with all obligations under its lending agreements.
We have no idea if CINE will be able to pay it back to the extent required, which would mean a waiver would be required. I share your opinion that CINE should have minimal difficulty in obtaining this. I was mentioning that if CINE is able to pay back the RCF sufficiently to avoid the test, then that is great news in my opinion, as it would appear to me that CINE is operating in line with their base case.
Hope this helps!
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