Despite having significantly reduced net interest-bearing debt over the past 12 months, we expect the leverage ratio to breach the debt covenant of 4.0x in Q1/20. The ratio increase is explained by a drop in 12-month rolling EBITDA, which we expect will continue to decline through Q2/20 and Q3/20. While we continue to view XXL’s balance sheet issues as fixable, we reduce our target price from NOK 10 to 6 and downgrade our recommendation from Hold to Sell.
12 Mar 2020
Testing balance sheet limits at the wrong time
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Testing balance sheet limits at the wrong time
Despite having significantly reduced net interest-bearing debt over the past 12 months, we expect the leverage ratio to breach the debt covenant of 4.0x in Q1/20. The ratio increase is explained by a drop in 12-month rolling EBITDA, which we expect will continue to decline through Q2/20 and Q3/20. While we continue to view XXL’s balance sheet issues as fixable, we reduce our target price from NOK 10 to 6 and downgrade our recommendation from Hold to Sell.