Indoor’s renewed financing agreement reduces short-term balance sheet risk

Translation: Original comment published in Finnish on 3/8/2024 at 7:23 am EET

KH Group announced in a press release on Thursday that the subsidiary Indoor Group has renewed its financing agreement. The agreement updated the payback schedules as well as covenant levels. The due date of the 9.25 MEUR bullet loan is moved to 2026. and the company’s covenant terms consider the current financial situation and future outlook. Indoor Group has had challenges with its covenant terms over the past year, so the new covenant terms that consider the company’s current financial situation are a welcome change.

We believe the financing agreement lowers Indoor's balance sheet risk

KH Group did not open the interest rate on the updated bullet loan, but we find it likely that the interest rate is slightly higher due to the tightened financial environment and more flexible covenant terms. In the big picture, we believe that the updated financing agreement and covenant terms is positive, as it reduces the balance sheet risk of potential refinancing needs. Based on the formulation of the release, we consider it likely that the new covenant terms will gradually tighten, which would be very suitable for the company, considering the performance that is under pressure. With the release, we see slight upward pressure in Indoor Group’s financing costs in our Q1 forecasts related to the update of the financing agreement. From Indoor’s point of view, we welcome the announcement, but it has a limited impact on our view of KH Group.