FXI bonds dip as does 3Q EBITDA

FXI Holdings (aka Foamex Innovations) bonds fell this week after the foam provider reported an EBITDA dip due to rising chemical costs and increased rent from a recent sale leaseback, said three sources familiar with the matter. Still, amidst the rising cost curve the company was able to boost revenue in the quarter, the sources added.

Adjusted EBITDA for the quarter decreased by 6% to USD 25.4m from USD 27m for the corresponding period the previous year, driven by the increased costs, the sources continued. Meanwhile, FXI generated USD 228m of revenue for 3Q, up 6.5% year-over-year, primarily related to market price increases the company instituted to account for rising input costs. Raw material costs, which include foam, increased roughly by 7%, the sources added.

“It looks like steady margin compression to me. Revenue is up because of cost push inflation, so the top-line growth doesn’t trickle down to the bottom-line,” one of the sources said.

The company’s USD 525m 7.875% senior secured notes due 2024 traded post-earnings as low as 90.75 to yield 9.972% on Friday (16 November) from 93.5 on 14 November, according to MarketAxess. “Normally, if [FXI] had reported lower EBITDA, then the bonds would just be down a point or so, but last week, the market was heavy, so the company was affected by almost three points,” said another source.

The company’s total debt also includes USD 2m of capital leases and USD 16m of a sale leaseback obligation. Based on USD 543m of total debt and USD 104m of LTM EBITDA, FXI’s total leverage and net leverage came to 5.2x and 3.6x, respectively, the sources noted.

As of 30 September, liquidity totaled USD 261m, including USD 90m of revolver availability on an undrawn USD 99m ABL facility, USD 9m letters of credit and USD 171m of cash, according to the sources.

FXI also had to absorb USD 2.3m in extra rent over the last nine months, of which USD 2m was in this quarter, in relation to the six US and one Mexican properties the company sold, the second source said.

Messages left for FXI officials were not returned.

2018 Debtwire

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