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QuestionsCategory: Financials QuadrantBreadtalk debt concern
Melvin Wong asked 3 years ago

Hi there,
Any concerns about the high debt in Breadtalk ? The net debt stands at S$62m and the debt to equity ratio is 176%, as such any increase in the interest rate will affect them by quite a bit . I understand that the debt was previously taken for the property and expansion. However, given the substantial fall in the free cash flow compared to the year 2017 will there be any concerns about the debt ? 

1 Answers
Victor Chng answered 3 years ago

Hi Melvin,
I don;t think there is a concern about their debt level as their net debt to equity is around 52% and their interest coverage ratio is at 5.2x and they can easily pay off their debt with three year cashflow. 

Matthew replied 3 years ago

Hi Victor,

May i ask how did u derive the interest coverage ratio of 5.2 and for looking at being able to pay of debt with three year cash flow, it is using free-cash flow??

Victor Chng replied 3 years ago

Hi Matthew,

Their rough latest four quarter interest should be around $12.6m and their 2018’s cash flow is $65.6m which will work out to be 5.2x.

Always use the operating cash flow when calculating debt to cash flow.