As I expected last week, Southern Cross have announced a further relaxation in their bank covenants as part of their final results. The fixed charge cover is now down to 1.1x. No further news on a possible takeover, except to reiterate the earlier news that "the approaches are still preliminary in nature, and the Board continues to believe it to be in shareholders' interests to continue to hold exploratory discussions."
A fixed charge cover of 1.1x is pretty generous. They only need to manage adjusted EBITDA of about £20m to hit that. And they have about £30m of headroom in their revolving credit facility. Perhaps the more important figure now is their cash-flow neutral point - I reckon they need at least £30m of adjusted EBITDA to be cash-flow positive.
I see no sign of this company going bust imminently - they seem to be within their covenants, they have headroom in their credit facility, and their bankers have repeatedly demonstrated their unwillingness to call in administrators. But then I've just suffered a total wipeout with Rok, so what do I know?
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