Kwik Fit’s owners will inject £20m into it to avoid a breach of banking covenants at the tyres and exhausts retailer, according to the Financial Times.
The chain has seen a slight downturn in sales growth in the recession as car owners have delayed the replacement of their tyres, brakes or exhausts by a few months, the paper reported.
However, during this same period etyres, the UKs leading online tyres company, has been seeing double digit growth as consumers have shunned the traditional high street depot with their large overheads, and gone online to track down the best deals on replacement tyres.
etyres sales have surged due to its low prices – up to 40 per cent cheaper than the leading high street tyre chains, including Kwik Fit – and because it offers a convenient mobile fitting service, saving customers time, hassle and money.
Kwik Fit’s acquisition by PAI, the French private equity group in 2005 for £800m, was financed partly with debt in euros and has now been hit by the falling pound.
As the pound has declined against the euro, Kwik Fit’s debt, which was £822m at the end of last year, has grown in proportion to its earnings, making it likely the company would breach its covenants at the end of the year. The £20m “equity cure” will ensure it passes the covenant test.
The French private equity group has already been repaid its initial investment in Kwik Fit by taking on extra debt at the company to pay itself a dividend in 2007.
Denna Bowman, Head Office