For those of you keeping score at home, here is the covenant provision in its new lending agreement that spells out the company’s required performance (p. 67):
a) Minimum Adjusted EBITDA. The Borrowers shall have Adjusted EBITDA, determined for each period specified below, in an amount not less than the amount specified for such period as follows (amounts in parenthesis indicate negative (deficit) amounts):
6 months ending March 31, 2009: | $ | (4,000,000 | ) | |
9 months ending June 30, 2009: | $ | 6,500,000 | ||
12 months ending September 30, 2009: | $ | 15,000,000 | ||
12 months ending December 31, 2009: | $ | 22,500,000 |
(b) Fixed Charge Coverage Ratio. Beginning with the fiscal quarter ended March 31, 2010, the Borrowers shall maintain a Fixed Charge Coverage Ratio, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, of no less than 1.00 to 1.00.
UPDATE: I’ve been doodling with the numbers (with a little help from our CFO). If, like us, the company is down 25% in revenues for the first half, on a rolling 12-month average it can easily cover the requirements. If there is a slight improvement and it is only down 20% for the second half, it will cover that, too. The risk — for all of us — is if the second half of 2009 is as bad as the first half.
