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Wed 14th Mar 2018 - Conviviality shares suspended after discovery of unexpected £30m tax bill
Conviviality shares suspended after discovery of unexpected £30m tax bill: Conviviality, the UK alcohol wholesaler serving consumers through the on-trade and its franchise retail estate, has stopped trading on AIM following an unexpected £30m tax bill. The company has called in PricewaterhouseCoopers (PwC) to assist with discussions with HM Revenue & Customs and creditors. Conviviality stated: “Further to the announcements made by Conviviality on 8 March 2018 and 13 March 2018, the company yesterday (Tuesday, 13 March) identified a payment due to HM Revenue & Customs of approximately £30.0m, which falls due for payment on 29 March 2018 and which has not been accrued for within its short-term cash flow projections. This has created a short-term funding requirement. The company’s announcement on 13 March 2018 confirmed an expected range of adjusted Ebitda of between £55.3m and £56.4m. To the extent the current situation creates operational difficulties, this may negatively impact the adjusted Ebitda range. The company is currently in compliance with its banking covenants. The next covenant test date is 29 April 2018. The company is subject to two banking covenants (i) for covenant debt (which excludes any amount drawn down under the company’s invoice discounting facility) to be less than 2.5 times the last 12 months adjusted Ebitda, and (ii) adjusted Ebitda to be at least four times the net financial charge. The company is fully drawn under its term loans and revolving credit facility and covenant net debt at 29 April 2018 is expected to be approximately £113.0m (which excludes any amount drawn down under the company’s invoice discounting facility). Based on the expected adjusted Ebitda of between £55.3m and £56.4m, this would give rise to a covenant test result of 2.04 times to 2.00 times adjusted Ebitda. The company continues to expect net debt to be approximately £150.0m for the period ending 29 April 2018 including the invoice discounting facility. The company has engaged PwC to assist it in its forthcoming discussions with HM Revenue & Customs and its key stakeholders including its lending banks, credit insurers, suppliers and other creditors, as well as to determine the potential impact of any resulting funding requirement on the company’s adjusted Ebitda expectation and compliance with its banking covenants. Following preliminary advice received from PwC, while there can be no guarantee, the board believes this short-term funding requirement will be satisfactorily resolved.”


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