SINGAPORE - Courts Asia is seeking to loosen some covenants on its S$75 million, 5.75 per cent Series 002 notes and commenced a consent solicitation exercise on Wednesday (March 7).
The notes were issued in March 2016 and mature on March 15, 2019.
Courts Asia said it is seeking more headroom as it adjusts to new accounting standards that will become mandatory between this year and next.
The adoption of these new standards is expected to have "a significant impact on the financial statements of the company," the issuer said. "However, no cashflow impact is expected to arise from the adoption of these accounting standards."
Among other things, Courts Asia wants to decrease the threshold for its minimum consolidated tangible net worth to S$120 million, from an original threshold of S$165 million.
The adoption of FRS 115 (Revenue from Contracts with Customers), which is mandatory for the financial year beginning on or after Jan 1 this year, has impacted Courts Asia's tangible net worth by more than S$75 million, it said.
In addition, 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.
At the end of last year, Courts Asia's consolidated tangible net worth was S$206.3 million.
Courts Asia is also seeking to reduce the minimum ratio of Ebitda (earnings before interest, taxes, depreciation and amortisation) to interest expense to 1.5 to 1. Currently, the minimum ratio is 1.75 to 1.
At the end of last year, Courts Asia's ratio of Ebitda to interest expense was 2.89 times.
Courts Asia noted that due to the early adoption of FRS 115, the restatement of the company's financials for the year ended March 31, 2016 resulted in the ratio of Ebitda to interest expense being reduced by 0.82 times to 2.27:1.
The resolutions will be proposed at a bond holder meeting to be held on March 29. A 75 per cent majority is required to pass the resolutions.
Courts Asia is giving bond holders an early consent fee of 0.25 per cent their principal amount if they vote in favour of the proposals by March 22.
Otherwise, they will receive a consent fee of 0.15 per cent their principal for voting favourably.