Similar narrative from the AFR....

Similar narrative from the AFR.

https://www.copyright link/street-talk/costa-contemplates-funding-options-with-downgrade-pending-20191022-p5335k

Costa contemplates funding options with downgrade pending

As Costa Group prepares to hand down an ugly trading update, attention at the company has turned to whether it also needs an equity top-up. The berries and citrus grower has new $500 million senior debt facilities which, while not due to mature until the 2022 and 2023 financial years, are subject to a handful of non-disclosed covenants likely to include leverage and interest cover. When it last reported, the company's net debt was worth 2.59-times adjusted EBITDA for the period ended June 30, which was up from 2-times at December 31 and 1.4-times one year earlier.

While covenant compliant at the time, Costa is a capital-hungry company. It is in the middle of capital investment and growth projects across tomatoes and mushrooms as well as its businesses in China and Morocco.

With another earnings downgrade expected - what would be its fourth warning - it is understood Costa is talking to its investment bankers about its options. As at Tuesday afternoon, sources said there had been no decision to pull the trigger on an equity raising. Fund managers had not been sounded and it was the company's preference to at least get its earnings update in the market on Wednesday, as promised, before rushing into anything like an equity raising.

There have certainly been better times to pass the tin around. So Costa's balance sheet is expected to attract plenty of attention on Wednesday and fund managers and analysts will likely ask management to address it by giving further guidance on covenants or talking through its options. The other options could include scaling back growth plans or asset sales.Costa Group shares last traded at $3.46, down from $6 this time last year. Its share register has also changed markedly in that time. The company's biggest institutional shareholders are value focused funds including Lazard, Mondrian Investment Partners and Schroder Investment Management, as well as Manny Phol's ECP Asset Management. UBS is the company's long-term adviser, while helped to float the business in 2015. Goldman Sachs, Macquarie, Credit Suisse and Morgans are among other brokers that coverage it from an equity research perspective.