Spire agrees covenant waiver with lenders, pulls dividend
By Abigail Townsend
Date: Wednesday 01 Apr 2020
(Sharecast News) - Spire Healthcare has opted to pull dividend payments amid the Covid-19 outbreak, despite its lenders agreeing to waiver covenant testing.
The group said its lenders would waiver covenant testing for the two scheduled test periods, at the end of June and the end of December, that are required under the company's senior facility agreement.
It also said that the agreement struck with the NHS last week would provide it with "sufficient liquidity and financial stability" during the coronavirus outbreak, as it is being paid weekly in advance. Spire is to provide the NHS with 30 of its hospitals from 30 March for a minimum of two weeks and then on a rolling basis, and will be able to recover various costs for doing so.
Spire also has an undrawn revolving credit facility of ?100m, but it argued it remained "prudent and in the long-term of interest of shareholders" to suspend dividend payments until the crisis was over. It had been scheduled to pay a final 2019 dividend of 2.5p per share.
Chief financial officer Jitesh Sodha said: "We have had constructive and helpful discussion with our group of lenders, reflecting our solid relationship with them."
Graham Doyle, analyst at Liberum, said: "We expected this outcome as given Spire's significant asset backing, high-profile deal with the NHS and longer-term cash flow potential, it made sense for its banks to waiver covenants.
"That said, it's worth mentioning that Spire may not breach these covenants anyway, it's just that visibility is so low in the current environment that it was prudent to increase balance sheet flexibility."
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