Service King capital structure drops on slow earnings recovery

Service King’s debt structure softened today after the collision center operator yesterday released 2Q21 earnings that showed a slower-than-expected recovery following the COVID-driven disruption to its business, according to two sources following the company. 

For the three-month period ended 30 June, Service King reported USD 265m in revenue, which, while up 49% from USD 177m booked in 2Q20, trailed 2Q19 sales by roughly 18%, the sources said. Since the pandemic and stay-at-home orders significantly depleted travel last year, the year-over-year comparison is not considered an accurate representation of the company’s performance, they noted.

Adjusted EBITDA for the same period shook out to positive USD 5.2m, compared to negative USD 9m in 2Q20 and positive USD 19.7m in 2Q19, they added.

On an LTM basis, the issuer recorded unadjusted EBITDA of negative USD 15.1m, the sources said. Including adjustments, the LTM figure totaled USD 5.5m, while pro forma adjusted EBITDA without a cap on addbacks — including USD 124.2m of COVID-related adjustments — amounted to USD 130.6m. Including the cap on adjustments, pro forma adjusted EBITDA came in at USD 22.7m.

Pro forma leverage stood at 4.6x through USD 596m of total debt and USD 130.6m of adjusted EBITDA without a cap. Including a cap on adjustments, leverage totaled 26.3x through USD 22.7m of adjusted EBITDA.

On the heels of the report, the borrower’s USD 771m Libor+ 675bps term loan due 2025 fell to 92/94, compared to 94.938/95.938 on 12 August, according to one of the sources. 

Its USD 375m 7.875% senior unsecured notes due 2022, meanwhile, caved today to 82.75 with a 26.693% yield, compared to trades at 87 to yield 21.447% on 12 August, according to MarketAxess. 

The company, owned by the Blackstone Group and Carlyle, held its earnings call at 11am ET today, on which it didn’t take questions for the fifth consecutive quarter.

Service King ended the quarter with USD 71.8m in liquidity through USD 19.8m of cash and USD 52m of revolver availability, the sources said. After the quarter ended, however, Service King drew an additional USD 20m from its revolver, bringing liquidity down to USD 51.8m, they noted. The company also has USD 10m of its revolver due this year, pinning pro forma liquidity at USD 41.8m, the sources went on.

For comparison, liquidity at 1Q21-end stood at USD 89m.

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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