Bapcor Limited has secured approval from its lenders for relaxed covenant arrangements covering the FY27 financial year, providing financial flexibility as the company pursues its operational turnaround. The revised terms represent a significant step forward in managing the company’s debt obligations during a challenging period of business reset, offering much-needed headroom as management executes its recovery strategy.
The covenant adjustments are structured in stages to reflect expected business improvement. The Net Leverage Ratio threshold has been increased to 3.5 times adjusted EBITDA for testing at 31 December 2026, before reverting to 3.0 times for the 30 June 2027 test and all subsequent periods. Similarly, the Fixed Charge Cover Ratio has been eased to 1.30 times for the December 2026 and June 2027 testing dates, tightening back to 1.75 times from December 2027 onwards. These adjustments provide meaningful breathing room during a critical execution phase of the company’s operational transformation.
For investors, the announcement carries both positive and cautionary signals. Lender approval signals that creditors retain confidence in management’s turnaround strategy and are willing to provide additional support during the transition period. This meaningfully reduces the near-term risk of a covenant breach, which would otherwise create substantial operational pressure. However, the need for revised covenants also underscores that Bapcor faces material operational headwinds requiring successful execution of the recovery plan. The staged reversion to tighter covenants makes clear that lenders expect demonstrable operational improvement by late 2027.
Bapcor’s Chief Financial Officer Kim Kerr stated that the revised arrangements provide “further financial flexibility” to support the “business reset and operational turnaround” currently underway. The next critical phase will be demonstrating genuine operational progress and cash generation that justifies the confidence being placed in the recovery plan by both lenders and shareholders. Investors should monitor upcoming financial results closely to assess whether the company is positioned to meet the tightened covenants when they take effect from December 2027. This announcement has been flagged as price sensitive and is considered material information by the ASX.
View the full ASX announcement (PDF)
About Bapcor Limited (ASX: BAP)
Bapcor Limited is an automotive parts, accessories, and equipment distributor operating across Asia Pacific with a network of over 900 locations in Australia and New Zealand. The company employs approximately 5,100 team members and operates through retail brands including Autobarn, Autopro, Midas, and ABS. Bapcor supplies vehicle parts and related services to both DIY customers and professional automotive service providers.
If you would like to discuss this announcement or how it might affect your portfolio, request a callback or call us on 1300 889 603.
