Courts Asia gets nod from noteholders to relax covenants on debt due 2019

FURNITURE and IT retailer Courts Asia on Tuesday said it has received more than 80 per cent of votes favouring a change in covenants on certain notes due 2019.

The firm had this month sought to relax some terms on a series of notes worth S$75 million and that pay a 5.75 per cent coupon. The notes were issued in March 2016 and mature on March 15, 2019.

Under the consent solicitation exercise, Courts Asia proposed to, among other things, lower the threshold for its minimum consolidated tangible net worth to S$120 million. The original threshold stood at S$165 million.

Courts Asia also moved to reduce the minimum ratio of Ebitda (earnings before interest, taxes, depreciation and amortisation) to interest expense to 1.5 times. Currently, the minimum ratio is 1.75 times. At the end of last year, Courts Asia's ratio of Ebitda to interest expense was 2.89 times.

On Tuesday, Courts Asia said as at 10am, some 83 per cent of note holders have voted in favour of the new terms. A 75 per cent majority is required to pass the resolutions.

Courts Asia had said it is seeking more headroom as it adjusts to new accounting standards that will become mandatory between this year and next.

The retailer said the adoption of FRS 115 - which deals with revenue from contracts with customers - has impacted Courts Asia's tangible net worth by more than S$75 million. The new standard was made mandatory for the financial year beginning on or after Jan 1 this year.

The adoption of FRS 109 (financial instruments), which is also mandatory from this year, is expected to result in lower opening retained earnings due to the recognition of a higher impairment allowance on trade receivables as well.

Shares of Courts Asia closed unchanged at S$0.265 on Tuesday.