Will Myer breach debt covenants?

This has turned into an absolutely toxic situation. I'm going to say Yes. DJ's impairments portend serious trouble come Myers own slash and burn on 21/3 which is now just over a month away.

From the AFR;

"However, analysts say the company is at risk of breaching debt covenants if earnings fall another 10 per cent to 20 per cent or if shareholder equity falls below $500 million.

Equity at last balance date was $1.07 billion, underpinned by $986 million of intangible assets, which are now being reviewed and will likely be written down at Myer's half-year result in March."

Is this a joke? Equity is 92% underpinned by intangible assets that are almost certainly going to be impaired.

Current total market cap on Commsec is only $456million. This is a punctured hole compared to shareholder equity at last balance date.

David Jones took a $712.5m or approximately a 1/3 cut in goodwill. I am going to assume Myer will take a similar impairment or worse.

Given the outlined covenants I am having serious doubts about Myer as a going concern for lenders.

Looks cheap but potentially very toxic. I'm staying on the sidelines for their March update.

Keen to hear fellow traders thoughts/.

Cheers
- Cali