Service King disclosed going concern language in its 3Q21 earnings report late yesterday, according to three sources familiar with the situation. The event came after the collision repair center operator’s bonds due 1 October 2022 became current, they said.  

The company also unveiled that it received a USD 15m Libor+ 675bps (75bps floor) term loan due 2025 from sponsors Blackstone and Carlyle to shore up its liquidity position, two of the sources continued. The loan was split between USD 12.2m from Blackstone and USD 2.8m from Carlyle, with interest on the debt set to accrue quarterly under a payment-in-kind structure, they said. There is a springing maturity on the loan if USD 135m of the notes are outstanding 90 days out from their due date, the sources noted.

As of 2 October, liquidity consisted of an all-cash balance of USD 31.4m. After the quarter ended, liquidity increased to roughly USD 98m due to USD 66.3m of proceeds from a sale leaseback. The cash and sale leaseback proceeds are expected to allow the company to fund debt obligations for the next 12 months, two of the sources said.

On the earnings front, Service King’s net sales totaled USD 264.7m in 3Q21, up 27% from the previous year, but adjusted EBITDA came in at negative USD 5.8m, compared to positive USD 5.4m year-over-year, the two sources went on. 

On an LTM basis, adjusted EBITDA came in at negative USD 5.7m, while pro forma LTM adjusted EBITDA came in at positive USD 80.4m, they added.

The company will host an earnings call tomorrow at 11am ET.

The issuer’s USD 375m 7.875% senior unsecured notes due 2022 last traded in size at 100.25 to yield 7.59% on 15 October, compared to trades at 92.25 to yield 16.718% in early October, according to MarketAxess. The bond traded in odd lots today at 99.255 to yield 8.766%. 

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

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