Service King 1Q21 adjusted EBITDA turns negative

After two quarters of positive adjusted EBITDA, Service King posted negative adjusted EBITDA of negative USD 7m for 1Q21, according to three sources familiar with the situation. This compares to positive USD 22.1m in the prior year period, two of the sources added. 

On an unadjusted basis, EBITDA totaled negative USD 11m, compared to positive USD 1.7m last year, two of the sources said. Revenue for the quarter totaled USD 232m, down 30% from the prior year.

On Service King’s earnings call Thursday (13 May), management credited the downturn to opening too many stores too quickly, along with closures caused by COVID-19 cases, the sources said. The company’s presence in the South was also crippled by February’s winter storms.

For the fourth consecutive quarter, management didn’t take questions from investors, two of the sources added. 

On an LTM basis, unadjusted EBITDA equaled negative USD 48m, while adjusted EBITDA shook out to negative USD 6.5m. After factoring in USD 171m of COVID-19 adjustments, pro forma LTM adjusted EBITDA came in at USD 165m.

Including the cap on adjustments, pro forma LTM adjusted EBITDA totaled USD 14.3m, one of the sources said. 

As of 31 March, liquidity totaled USD 89m through USD 37m of cash and USD 52m of revolver availability, two of the sources said. 

In December 2020, the company priced a USD 775m term loan due 2025 at Libor+ 675bps with a 99 OID to refinance its existing term loan. The offering was upsized from USD 700m and priced tighter than initial talk.

The company pitched the new loan, a crucial refinancing of near-term debt, as a bridge to a 2021 earnings rebound when the negative effects of the pandemic should begin to wane, as reported.

The loan is quoted 100.75/101.5 today, down from levels in April at 101.625/102.438, according to Markit.

Service King’s USD 375m 7.875% senior unsecured notes due 2022 last traded in size at 98.5 to yield 9.014% on 27 April before the recent earnings report, according to MarketAxess. The notes changed hands in odd lots today at 98.298 to yield 9.213%. 

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

2021 Debtwire

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