Måsøval secures temporary waiver on financial covenants.
Norwegian salmon farmer Måsøval has obtained a temporary waiver on its financial covenants for the fourth quarter of 2024, following increased interest costs related to residual tax on planned tax positions, the company announced on Thursday.
The waiver process, initiated by Måsøval, has been approved by its lenders under its NOK 1.9 billion ($169 million) senior bank financing. Under the temporary terms, the interest cover ratio must not fall below 2.75x, and the equity ratio must remain above 25%.
The original financial covenants will be reinstated from the first quarter of 2025, requiring an interest cover ratio of at least 4.00x and a minimum equity ratio of 30%.
Måsøval stated that it expects to exceed both the temporary and original requirements for the fourth quarter of 2024.
The announcement was made in compliance with the disclosure requirements under section 5-12 of the Norwegian Securities Trading Act.
What the Waiver Means
A waiver of financial covenants is typically granted when a company faces temporary financial strain that might cause it to breach the conditions set by its lenders. In Måsøval’s case, increased interest costs—stemming from residual tax—led to the request for more lenient financial thresholds for Q4 2024.
The interest cover ratio measures a company’s ability to pay interest on its outstanding debt. Måsøval’s temporary reduction to 2.75x means that, for every NOK 1 in interest expenses, the company must generate at least NOK 2.75 in earnings before interest and taxes (EBIT). This is lower than the usual requirement of 4.00x, giving the company more financial breathing room.
The equity ratio reflects the proportion of a company’s total assets financed by shareholders rather than debt. Temporarily lowering this requirement to 25% from the usual 30% allows Måsøval to maintain compliance despite fluctuations in its balance sheet.
The waiver suggests that Måsøval’s lenders remain confident in the company’s long-term financial health, as the original covenants will be reinstated in Q1 2025. Given Måsøval’s statement that it expects to exceed both the temporary and original requirements, the adjustment appears to be a precautionary measure rather than a sign of deeper financial distress.
