PARIS, July 17 (Reuters) - French clothing retailer Vivarte, owned by private equity firm Charterhouse, said it breached certain terms on its loans because of unfavourable economic conditions but that it was still able to meet its repayment deadlines.
Banking sources with direct knowledge of the matter had said on Tuesday that Vivarte communicated with its debt investors on Monday that it had breached leverage and interest covenants.
Vivarte’s ratio of debt to earnings before interest, tax, depreciation and amortisation (EBITDA) reached 6.3, compared with the 6 times agreed with its creditors, company head Marc Lelandais said on Wednesday.
The group’s net debt is 2.1 billion euros ($2.76 billion).
Charterhouse bought Kookai fashion label owner Vivarte in 2007 backed by 3.43 billion euros of loans and in May last year it conducted an amend and extend of its loan facilities, pushing out the maturity of its debt by two years, according to Thomson Reuters LPC data.
Vivarte said it had been hit by an unfavourable economic and consumer environment in France, made worse by weather conditions between March and May, although sales had picked up in June and July.
The group said in a statement that it had limited the drop in sales to 2.5 percent over the last 10 months, with stable margins and a notable improvement in its ready-to-wear business. Its EBITDA (earnings before interest, tax, depreciation and amortisation) margin is above 12 percent, it added.
Vivarte had sales of 3.1 billion euros in the year ended Aug. 31 and generates about 100 million in cash each year. It is due to repay 300 million euros of debt in 2015/16.
Vivarte said its 600 million euros in cash would enable it to meet its debt repayments over the next three years, adding that it had also recently sold real estate assets in “particularly favourable conditions”.
Bankers said Vivarte’s balance sheet was recently boosted by 230 million euros through the sale and leaseback of 91 properties, including company headquarters.