OCADO, the online grocery shop, yesterday brushed off market speculation that it is seeking to renegotiate its debt covenants with its lenders, saying there was “no threat” it would breach its covenants.
A weekend report suggested the online supermarket, which floated to much fanfare in 2010, was seeking to reset its debt or extend the repayment period with its lenders ahead of a key covenant test at the end of this month.
However, yesterday the firm said its lenders, which include Lloyds Banking Group, HSBC and Barclays, were “fully supportive” of the business.
It added that its covenant test would not take place until early next year and its £100m loan facility needed to be rolled over in 2014.
The firm is currently the most shorted stock by hedge funds, according to official shorting disclosure figures published by the Financial Services Authority, suggesting investors believe the firm will do badly in future.
A spokesman said: “The lenders are very supportive and always have been.
“There’s no threat they will breach the covenant. At some stage the facility will be reviewed.”
Ocado’s covenants require its net debt to be less than 3.5 times its earnings. Analysts have been pessimistic about the firm’s chances of staying below the debt ceiling.
Its last set of results in June showed a debt pile of £71.3m. Projected full year revenues of £27m by analysts would be 4.4 times earnings, a breach of the covenant.
In September, chief executive Tim Steiner hinted the firm would be open to selling and leasing back one of its warehouses to avoid it breaching its debt covenants. Ocado was founded in 2000 by three former Goldman Sachs bankers. It recently took on bespoke investment outfit Ondra Partners as advisers.