DISTRESSED DAILY: Virus Could Spread to Earnings Adjustments

The outbreak of coronavirus has caused both healthy and bankrupt companies to cite ongoing disruption and identify risks, which are likely to translate into future earnings adjustments, according to Xtract Research.

• Companies are starting to mull massaging earnings to account for unexpected losses attributed to the virus, Bart Capeci, senior covenant analyst at Xtract, wrote in a report.
  • For existing debt agreements, changes to reporting metrics such as consolidated net income and Ebitda will lessen the negative impact on key metrics like leverage, interest-coverage ratios, and other provisions that govern the agreement between lender and borrower, Capeci said.
• We ...