Travelex Limited and TP Financing 3 Limited unlikely to comply with required Leverage Ratio for Q1 2020

Maria Nikolova

The Travelex Group’s current view is that the Revolving Credit Facility borrowers are unlikely to comply with the required Leverage Ratio for Q1 2020, which is due to be tested on March 31, 2020.

Travelex Financing Plc today provided an update to stakeholders of Travelex Holdings Limited and its subsidiaries (the “Travelex Group”) on the status of the business and the steps being taken to address the current situation.

In line with an earlier announcement, Travelex Group reiterated that it has a legal and financing structure capable of operating separately, on a stand-alone basis, and recent board changes reflect this independence from Finablr PLC (LON:FIN) and its shareholders.

Last week saw the Finablr representatives Dr BR Shetty, Binay Shetty, Abdulrahman Basaddiq and Promoth Manghat resign from the Travelex board. The continuing Travelex board directors are Tony D’Souza, Travelex CEO, and James Birch, Travelex General Counsel. These changes, Travelex notes, mean that there is no longer any overlap between the boards of Travelex and Finablr.

Travelex has also appointed an independent team of advisers to support the Travelex Group, separate to those appointed by Finablr, including Sidley Austin LLP as legal advisor and PwC as financial advisor.

Travelex and its advisers have begun discussions with certain of the group’s lenders and their advisers and with the advisers to certain bondholders representing more than 60% of the outstanding face value of the Senior Secured Notes.

In parallel, Travelex is also exploring various avenues with stakeholders to ensure continued access to funds. The company notes the recent letter from HM Treasury, the Bank of England and the FCA in regard to, inter alia, new or increased overdrafts from UK banks. The company’s key lenders have already been providing support for the Travelex Group.

Travelex also commented on covenant compliance. Based on unaudited management accounts TP Financing 3 Limited and Travelex Limited (the “RCF Borrowers”) complied with their Q4 2019 financial covenant requiring a Leverage Ratio at or below 3.48x. Let’s recall that Travelex estimated that there will be a reduction of Underlying EBITDA in Q1 2020 compared to the equivalent period of 2019, mostly attributable to the malware. The outbreak of COVID 19 has resulted in an increased number of airline cancellations and airport closures which is likely to worsen the position.

The Travelex Group’s current view is that the RCF Borrowers are unlikely to comply with the required Leverage Ratio for Q1 2020, which is due to be tested on March 31, 2020.

The Company is intending to use its grace periods to seek appropriate waivers from its lenders under its Revolving Credit Facility.

Earlier this week, Standard & Poor’s took rating actions regarding Travelex Holdings Ltd. S&P lowered to ‘CC’ from ‘CCC’ its issuer credit rating on Travelex. Additionally, it lowered its issue rating on the group’s €360 million notes due 2022 to ‘C’ from ‘CCC-‘ and the issue rating on the £90 million super senior RCF to ‘CCC’ from ‘B-‘.

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