Risk of Financial Covenant Breaches and Acceleration in Syndicated Loans
First written in FY2023-Q3. 2 of 8 entries say "Mitigated", first in FY2024-Q2. Latest entry: FY2026.
The whole theme swung hardest in 2017: 8 of 55 companies on the "Worse" side.
53 other companies' latest entry also says "Mitigated".
- FY2026MitigatedAnnual report
「The agreement is not subject to financial covenants.」
It was stated that the new commitment line is not subject to financial covenants, indicating progress in addressing the previous risks of covenant breaches and loss of the benefit of time. However, the balance of borrowings and the risk of rising interest rates remain. - FY2025ReframedAnnual report
「On 31 March 2025, we raised a substantial amount of financing from MUFG Bank, Ltd. in the form of a bridge loan. As a result, the ratio of borrowings to total assets is high.」
The focus shifted from explanations concerning breaches of and releases from the syndicated loan’s financial covenants to explanations of the bridge loan, the high borrowing ratio, and the risk of rising interest rates during the current fiscal year. - FY2025-H1RestatedAnnual report
「The operating profit or loss, ordinary profit or loss, and profit or loss before income taxes stated in the consolidated and non-consolidated statements of profit or loss at the end of fiscal 2025 must not all be losses.」
The financial covenant requiring that the operating profit or loss, ordinary profit or loss, and profit or loss before income taxes in the consolidated and non-consolidated statements of profit or loss at the end of fiscal 2025 not all be losses remains in place. Although the company recorded operating profit, ordinary profit, and interim net income during the interim period, the year-end condition remains. - FY2024RaisedAnnual report
「The operating profit or loss, ordinary profit or loss, and profit or loss before income taxes stated in the consolidated and non-consolidated statements of profit or loss at the end of fiscal 2025 must not all be losses.」
Following the amendment of the financial covenants, a condition was added requiring that the operating profit or loss, ordinary profit or loss, and profit or loss before income taxes in the consolidated and non-consolidated statements of profit or loss at the end of fiscal 2025 not all be losses. - FY2024-Q3RestatedAnnual report
「① The operating profit or loss stated in the consolidated statement of profit or loss and the statement of profit or loss at the end of fiscal 2024 must be no less than negative ¥180 million and negative ¥450 million, respectively. ② The ordinary profit or loss stated in the consolidated statement of profit or loss and the statement of profit or loss at the end of fiscal 2024 must be no less than negative ¥150 million and negative ¥500 million, respectively.」
The amended syndicated loan agreement continues to contain financial covenants relating to operating profit or loss and ordinary profit or loss. No new breach had been disclosed as of the third quarter. - FY2024-Q2MitigatedAnnual report
「The company was in breach of the financial covenants attached to the term loan agreement and committed term loan agreement under the syndicated loan at the end of the previous consolidated fiscal year, but the matter had been resolved as of the end of the second quarter of the current consolidated fiscal year because amendment agreements to the financial covenants under each agreement were executed on 27 September 2023.」
The breach of the financial covenants that occurred at the end of the previous fiscal year was resolved by executing amendment agreements as of the end of the current quarter. However, financial covenants remained in place after the amendments. - FY2023MaterialisedAnnual report
「Although the company was in breach of the financial covenants at the end of the current consolidated fiscal year, it has been discussing a waiver of the lenders’ rights to declare the loss of the benefit of time and other consequences with its financial institutions, and has obtained their agreement not to exercise those rights. Accordingly, it expects to continue receiving support from financial institutions.」
A breach of the financial covenants actually occurred. At the same time, the company obtained an agreement from the financial institutions not to exercise their rights. - FY2023-Q3First statedAnnual report
「① The operating profit or loss stated in the consolidated statement of profit or loss and comprehensive income at the end of fiscal 2023 must be no less than negative ¥1,200 million, or the operating profit or loss stated in the statement of profit or loss must be no less than negative ¥1,382 million. ② The ordinary profit or loss stated in the consolidated statement of profit or loss and comprehensive income at the end of fiscal 2023 must be no less than negative ¥1,200 million, or the ordinary profit or loss stated in the statement of profit or loss must be no less than negative ¥1,393 million. ③ The operating profit or loss and ordinary profit or loss stated in the consolidated statement of profit or loss and comprehensive income and the statement of profit or loss at the end of fiscal 2023 and each subsequent fiscal year must not be losses for 2 consecutive periods.」
The term loan agreement and committed term loan agreement contain financial covenants relating to operating profit or loss and ordinary profit or loss, and a breach could result in the loss of the benefit of time for all contractual obligations.