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Redgroup gains waiver for covenant breaches

Monday 30th August 2010

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Redgroup Retail, the owner of the Whitcoulls and Borders book stores, gained a waiver for breaches to its banking covenants and said chairman Rod Walker will step down.

The Pacific Equity Partners-owned book, stationery and entertainment company, based in Melbourne, said it is exploring a range of options to strengthen its balance sheet longer term.

Last month the company forecast earnings before interest, tax, depreciation and amortisation of about $25 million for the 12 months ended August 28, against which interest payments of approximately $9 million were due, which would have put it in breach of two out of three banking covenants.

It cited a tough trading environment, particularly in Australia, in the last quarter of its financial year. Walker led the company as executive chairman after its acquisition of the Borders book store chain.

It named Joe Browne, finance director of electronics manufacturer Startronics as a non-executive director, replacing Walker.

PEP acquired the A&R Whitcoulls group from Britain's WH Smith in 2004, and Redgroup Retail now forms one of 13 investments it has in mostly Australia and New Zealand.

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