FirstGroup up 15% amid covenant, vaccine news

Shares of Aberdeen-based bus and rail giant FirstGroup plc rose 15% on Monday amid news that it secured “enhanced financial flexibility from its lenders” and the announcement that the Pfizer and BioNTech experimental COVID-19 vaccine was more than 90% effective.

In a stock exchange statement, FirstGroup said: “As previously indicated in the trading update of 15 September 2020, FirstGroup plc expects to report a small adjusted operating profit for the seasonally weaker first half of the current financial year.

“This result would be ahead of the base case scenario outlined in the full year results announcement earlier this summer.

“As also previously stated the 30 September 2020 covenant tests are expected to be comfortably met when the accounts for the period are finalised.

“However, whilst the board is confident that the balance sheet is now robust in a range of downside scenarios, as a matter of prudence the group determined that it is an appropriate point to secure enhanced financial flexibility from its lenders for the next two covenant testing dates, covering the typical period of twelve months.

“The group has therefore agreed covenant amendments for the 31 March 2021 and 30 September 2021 tests with its lending banks and USPP investors on similar terms.

“The net debt:EBITDA covenant has been amended to less than 5.5 times and then 4.5 times for the March and September tests respectively (compared to 3.75 times normally).

“At both testing dates the fixed charge covenant has also been amended to greater than 1.0 times (compared to 1.4 times normally).

“The group has agreed that net debt including rail ring-fenced cash will not exceed £2.0bn and minimum liquidity levels of £150m will be maintained during this period.

“The group’s free cash (before rail ring-fenced cash) and undrawn committed revolving banking facilities has remained broadly stable at c.£810m as at 6 November 2020.

“The group has ‘investment grade’ long-term issuer credit ratings from both Fitch Ratings and S&P Global Ratings.

“The group will continue to take all prudent and appropriate action to ensure that it emerges from the pandemic in the most robust position possible in order to best serve our communities and deliver on our strategic plans.”

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