Fortuna Silver announces proposed amendments to financial covenants

By Sarah Lizee

Olympia, Wash., May 5 – Fortuna Silver Mines, Inc. said it is in discussions with its senior lenders to amend the financial covenants contained in its $150 million credit facility.

The facility requires the company to maintain a total debt to EBITDA ratio of not greater than 3:1. As of the financial year ended Dec. 31, 2019, the total debt to EBITDA ratio was 1.7:1.

Government-mandated constraints on business to curb the spread of Covid-19 in Peru and Mexico, which host the company’s operating mines, have resulted in reduced operations at the Caylloma Mine during the first quarter of 2020, and subsequent to the end of the quarter, have resulted in the suspension of operations at the San Jose Mine, the company said in a press release.

As a result, the company entered discussions with its lenders and has obtained agreement in principle to amend the financial covenants to provide for the following:

• A total net debt to EBITDA ratio of not greater than 4.5:1 for the remaining three quarters of 2020 and the first quarter of 2021, reducing to 4:1 in the second quarter of 2021 for the remainder of the term of the credit facility;

• A net senior secured debt to EBITDA ratio of not greater than 3:1 in the remaining three quarters of 2020 and the first quarter of 2021, reducing to 2:1 in the second quarter of 2021 for the remainder of the term of the credit facility; and

• An EBITDA to interest expense ratio of a minimum of 4:1 beginning in the second quarter of 2020.

The interest rate on the credit facility will continue to be based on a sliding scale at one-month Libor plus an applicable margin ranging from 2.5% to 3.5% but will be amended to be based on the net senior secured debt to EBITDA ratio.

The amendment is subject to the completion of definitive documentation between the parties.

Interest coverage will be based on rolling four quarters of EBITDA and interest expense, beginning with the four quarters covering the third quarter of 2019 to the second quarter of 2020, for the remainder of the term of the credit facility.

Fortuna is a silver producer based in Vancouver, B.C.

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