Service King reports 1Q20 EBITDA decline, forgoes Q&A on call

Service King’s latest earnings featured a coronavirus-adjusted LTM EBITDA figure, or EBITDAC, of USD 134.2m, according to two sources familiar with the company. This accounts for USD 39m of labor savings and USD 2.4m of COVID-19 addbacks. 

Stripping the LTM EBITDA figure of those further adjustments, the Blackstone and Carlyle-owned company generated USD 89.5m of adjusted EBITDA over the 12 months ending 28 March. 

Leverage balloons to 8x through the first lien and 12.1x total on an unadjusted EBITDA basis through USD 1.09bn of total debt, the sources said. Giving credit for a total USD 44.7m of addbacks, leverage is 5.3x through the first lien and 8.1x total. 

On Wednesday’s (20 May) earnings call, management said Service King saw little impact from COVID-19 this quarter as it only affected the last two weeks of March – but that April and May were further impacted. 

Management did not take any questions on the call and asked investors to submit any queries to the investor relations department via email. Questions chosen by the company will be displayed on the data site, the sources said.

The company has also limited new requests for access to its data site, one of the sources added. 

For 1Q20, adjusted EBITDA declined 11% to USD 22.1m, from USD 24.9m in 1Q19, driven by margin compression and increased SG&A costs due to COVID-19 and higher labor expenses. Revenue grew 1.4% year-over-year to USD 329.4m, driven by same-store sales growth of 3%. 

As of 28 March, the company had a cash balance of USD 165m, sources said. The issuer fully tapped its USD 100m revolver during 1Q after the start of the pandemic, as previously reported. 

An ad hoc group of lenders has selected Evercore and Gibson Dunn to prepare for potential negotiations, as the auto repair company will face earnings erosion due to COVID-19 headwinds. A bondholder group has also formed with Houlihan Lokey and Akin Gump, as reported. 

Last month, the company postponed the 1 April coupon to its bondholders, but repaid the obligation within the 30-day grace period.

Service King’s USD 375m 7.875% senior unsecured notes due 2022 last traded in size at 73 to yield 23.254% on 12 May, trending higher from trades in the 70-71 context in early May, according to MarketAxess. The notes are quoted today in the 75/77 context, according to a trader.

The USD 600m Libor+ 275bps (x% floor) first lien term loan due 2021 is quoted in the 88.25/90.078 context, compared 87/90 last week, according to Markit.

Carlyle declined to comment. Blackstone and Service King did not respond to requests for comment.

2020 Debtwire

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