Takko Said to Be at Risk of Breaching Loan Covenant Next Year

Takko Fashion GmbH’s latest earnings report signals the German retailer is at risk of breaching terms of its loans next year, according to three people familiar with the matter.

The company’s earnings before interest, tax, depreciation and amortization dropped 18 percent to 89.5 million euros ($110 million) in the 12 months through October, said the people, who asked not to be identified because the information is private. Loan covenants governing an 85 million-euro revolving credit facility and 190 million euros of trade guarantees will be breached if Ebitda drops below 85 million euros, the people said.

Retailers are being hurt in Europe as shoppers cut spending amid the region’s anemic economic growth. Takko, owned by Apax Partners, said this week its Chief Financial Officer Hannes Rumer will leave the company in coming months and it’s looking for a replacement.

Officials at Telgte, Germany-based Takko, who asked not to be identified citing company policy, and Matthieu Roussellier, a spokesman for Apax Partners employed by Greenbrook Communications in London, declined to comment on the earnings and the loan covenants.

Takko’s 380 million euros of 9.875 notes due in April 2019 declined 35 percent this month, according to data compiled by Bloomberg. The bonds fell to a low of 40 cents today, the data show.

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