Risks relating to financial covenants associated with borrowings to finance the Playwire acquisition
First written in FY2019-Q1. 3 of 8 entries say "Reframed", first in FY2019-Q2. Latest entry: 2026-09-25.
FreakOut Holdings moved to the "Worse" side of this theme in 2020, 3 years before the typical company in this theme (2023).
18 other companies' latest entry also says "Advanced".
- 2026-09-25AdvancedTimely disclosure
「Financial covenants: ① At the end of the fiscal year ending September 2026 and at the end of each subsequent fiscal year, the total amount of net assets shown in the consolidated balance sheet must be maintained at or above the higher of an amount equivalent to 75% of the total net assets shown in the consolidated balance sheet at the end of the fiscal year ended September 2025 and an amount equivalent to 75% of the total net assets shown in the consolidated balance sheet at the end of the most recent fiscal year. ② The ordinary income or loss shown in the consolidated statement of income at the end of the fiscal year ending September 2026 and at the end of each subsequent fiscal year must not be a loss for two consecutive fiscal years.」
Following the execution and drawdown of a syndicated facility agreement, specific conditions were disclosed for the previously reported financial covenants attached to the commitment line agreement, including maintenance of net assets and ordinary income or loss. - FY2025ReframedAnnual report
「(1) Maintain total net assets stated on the consolidated balance sheet at each fiscal year-end at ¥6.03 billion or more. (2) Maintain the total of operating income or loss and share of profit or loss of investments accounted for using the equity method stated on the consolidated statement of income, together with depreciation and amortisation and amortisation of goodwill stated on the consolidated statement of cash flows, at ¥1.3 billion or more at each fiscal year-end. (3) Maintain cash and deposits stated on the consolidated balance sheet at each fiscal year-end at ¥3 billion or more.」
Specific maintenance conditions for the previously disclosed financial covenant risk were disclosed: net assets of at least ¥6.03 billion, total profit and related items of at least ¥1.3 billion, and cash of at least ¥3 billion. - FY2024ReframedAnnual report
「To secure stable financing, the Group has entered into a commitment line agreement with financial institutions. The agreement contains certain financial covenants. If the Group breaches these covenants, it could lose the benefit of the term of the loans and be required to make lump-sum repayments, potentially affecting its operating results.」
The risk has been recast from the previous description of the syndicated loan relating to funding for the acquisition of Playwire to the risk arising from the financial covenants attached to the commitment line agreement. - FY2020MaterialisedAnnual report
「The Group recorded an ordinary loss and a net loss attributable to owners of the parent for the second consecutive fiscal year, resulting in a breach of the financial covenants under the syndicated loan agreement entered into by a consolidated subsidiary with its principal financial institutions. The Company discussed the matter with each financial institution and obtained agreement from all principal financial institutions not to demand the loss of the benefit of the term of the loans in connection with the covenant breach.」
A breach of the financial covenants actually occurred as a result of ordinary losses and net losses attributable to owners of the parent for 2 consecutive fiscal years, but the Company obtained agreement from its principal financial institutions not to demand the loss of the benefit of the term of the loans. - FY2019RestatedAnnual report
「FOPW Co., Ltd., a consolidated subsidiary of the Company, has entered into a syndicated loan agreement arranged by Mizuho Bank to refinance borrowings from existing financial institutions. The agreement contains certain financial covenants. If these covenants are breached, the Group could lose the benefit of the term of the loans and be required to make lump-sum repayments, potentially affecting its operating results and financial position.」
The Company continues to disclose FOPW’s syndicated loan and the existence of financial covenants relating to profit, net assets, leverage and debt service coverage. - FY2019-Q3RestatedAnnual report
「株式会社FOPW, our consolidated subsidiary, entered into a syndicated loan agreement arranged by Mizuho Bank to refinance its existing borrowings from financial institutions. The agreement includes certain financial covenants, and if these are breached, the company may lose the benefit of time and be required to make a lump-sum repayment, which could affect our financial results and financial position.」
The disclosure continued to cover the syndicated loan agreement and financial covenants relating to consolidated profit, net assets, the leverage ratio and the debt service coverage ratio. - FY2019-Q2ReframedAnnual report
「① The company's consolidated ordinary profit and net income for the fiscal year ending at the end of September 2019 and each subsequent fiscal year must not be negative for 2 consecutive fiscal years. In addition, 株式会社FOPW's ordinary profit and net income on a simplified consolidated basis for the simplified consolidated period ending at the end of December 2019 and each subsequent simplified consolidated period must not be negative for 2 consecutive periods. ② The consolidated net assets account on the company's balance sheet for the fiscal year ending at the end of September 2019 and each subsequent fiscal year must be at least 75% of the corresponding amount for the preceding fiscal year. ③ 株式会社FOPW's gross leverage ratio (Note 2) on a simplified consolidated basis for the simplified consolidated period ending at the end of December 2019 and each subsequent simplified consolidated period, measured over the most recent 12 months, must be maintained at 2.30–3.65 or below at the end of each simplified consolidated period. ④ 株式会社FOPW's debt service coverage ratio (Note 3) on a simplified consolidated basis for the simplified consolidated period ending at the end of December 2019 and each subsequent simplified consolidated period, measured over the most recent 12 months, must be maintained at 1.05 or higher.」
The financial covenants continued to be disclosed, explicitly covering not only the company's consolidated results but also losses, net assets, the leverage ratio and the debt service coverage ratio for FOPW's simplified consolidated periods. - FY2019-Q1First statedAnnual report
「① The company's consolidated ordinary profit and net income for the fiscal year ending at the end of September 2019 and each subsequent fiscal year must not be negative for 2 consecutive fiscal years. ② The consolidated net assets account on the company's balance sheet for the fiscal year ending at the end of September 2019 and each subsequent fiscal year must be at least 75% of the corresponding amount for the preceding fiscal year. ③ The gross leverage ratio (Note 1) of 株式会社FOPW on a consolidated basis for the fiscal year ending at the end of December 2019 and each subsequent fiscal year, measured over the most recent 12 months, must be maintained at 2.30–3.65 or below at each fiscal year-end. ④ The debt service coverage ratio (Note 2) of 株式会社FOPW on a consolidated basis for the fiscal year ending at the end of September 2019 and each subsequent fiscal year, measured over the most recent 12 months, must be maintained at 1.05 or higher.」
The ¥2,500 million borrowing to be used for partial repayment of the funds borrowed to acquire Playwire is subject to financial covenants, including avoiding consecutive periods of consolidated losses, maintaining net assets at 75% or more, maintaining a gross leverage ratio of 2.30–3.65 or below, and maintaining a debt service coverage ratio of 1.05 or higher.