Mining company First Quantum Minerals has successfully negotiated adjusted terms to some of the financing facilities that have been availed to them by lenders in light of the unprecedented COVID-19 pandemic, according to a statement from the company.
“During this unprecedented time, the Company, with the support of its long-term relationship lenders, has taken the proactive step of renegotiating the terms of the financial covenants under the loan agreement”, read a statement from Philip Pascall, Chairman and CEO published on SENS on 24 April 2020 . “We appreciate the flexibility and support from our lenders and their continued commitment to work with us as we navigate this current uncertainty”
The financial covenants under FQM’s senior $2.7 billion Term Loan and Revolving Credit Facility amended are in “management’s long held practice of proactively addressing debt compliance and managing risk in periods of uncertainty.”
Following the adjustment, a number of debt related financial ratios have since been adjusted and will be reviewed once the storm is over. “The Net Debt to EBITDA Ratio has been increased as follows
- to 5.00 for the third and fourth quarters of 2020;
- to 4.75 for the first and second quarters of 2021; and
- to 4.50 for the third and fourth quarters of 2021.
The net debt-to-EBITDA ratio is a debt ratio that shows how many years it would take for a company to pay back its debt if net debt and EBITDA are held constant. The other ratio adjust is the Debt Service Cover Ratio that has been decreased as follows:
- to 1.00 for the second, third and fourth quarters of 2020; and
- to 1.10 for all quarters of 2021.
The debt-service coverage ratio (DSCR) is a measurement of the cash flow available to pay current debt obligations. “The definitions of EBITDA and Cash Available for Debt Service have been amended to exclude the EBITDA and net cash flows from Ravensthorpe up to and including the second quarter of 2020, while the Company brings this operation out of care and maintenance and into commercial levels of production”. The restart of operations at Ravensthorpe have continued despite the pandemic with the first shipment expected to be within the first half of the year and is the reason why the Australian outfit has been carved out of the computation.
Despite the uncertainty, FQM advised that the financial covenants will revert to the original ratios from 2022 onwards.
