De Beers Finances, Contd.

A publication called Euroweek just put up an article which reports:


De Beers has asked its banks for a covenants waiver amid a slump in sales of diamonds that led the company to slash production by 91% in the first quarter of the year. The borrower, which launched the amendment this week, is seeking to waive covenant tests on a $3bn revolver in the first phase of a wider debt restructuring process.


Spokeswoman Lynette Gould told me: “I’m not sure what the news is here. We’ve always said (since before the recession) that we would be looking to renew our $1.5 billion loan facility which comes due in March 2010. We started these discussions with our banks several weeks ago.”


A banker I spoke to said that it is “quite normal” to waive covenants. However he was intrigued by one part of the article that said “De Beers had EBITDA $1.22bn in 2008 and had net debt of $3.55bn at the end of the year, leaving it leveraged 2.9 times.”

That is high for a corporate borrower, he says. Most of the better investment grade companies have leverage under 2:1.



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JCK News Director