Speciality bakery giant Aryzta has agreed a deal with the majority of its lenders to amend the covenant terms of its debt facilities and give the company increased headroom to deal with the uncertainty created by COVID-19.

On Monday, Aryzta announced it had received consent from its lenders to change the financial covenants on its €1.5bn of net debt. Under the new financial covenants, the company said the ceiling for its net debt to earnings (EBITDA) ratio has been revised upwards to a maximum level of 6 times, while its net interest ratio will be greater than 1 times.

COVID impact

The increased covenant levels will give Aryzta additional wiggle room over the coming years as it grapples with the financial challenges of COVID-19. Since the outbreak of COVID-19 across its core markets in Europe and the US, Aryzta’s sales and profitability have been hit hard.

In April, Aryzta announced that its sales had collapsed 50% year-on-year which forced the company to close eight of its bakeries in Europe and the US as well as to furlough 30% of its staff. Sales have slowly recovered for the company but still remain behind on last year.

Aryzta’s most recent sales update came at the end of July when it said sales for the month were down 18% year-on-year. Aryzta said sales in the retail and quick service channels are recovering but that demand from foodservice customers is still significantly down on normal levels.

Aryzta, which owns the Cuisine de France brand, has since reopened almost all of its bakeries in Europe and North America with production lines back to 80% to 90% capacity.