National Express has struck a deal with banks to delay for six months a tightening of the terms governing its £1.2bn debt mountain.
The bus and rail operator had faced reverting to stricter lending terms from 30 June, under which its net debt would be pegged at three-and-a-half times its earnings before interest, tax, depreciation and amortisation (Ebitda).
National Express said it would have met the tougher terms after a cost-cutting drive led to job losses and a reduced dividend, but the group, which also operates in the US and Spain, has agreed a relaxation on its covenants to four times Ebitda for the rest of the year to give it "additional headroom". In recent weeks, speculation about National Express's balance sheet and a potential £400m rights issue has been growing.
The company's shares fell by 24.25p, or 7.8 per cent, to 286.75p yesterday, as some City analysts said a breach of covenants was still likely in the second half. Last month, National Express said revenues at its UK bus and coach division had risen by 4.1 per cent in the three months to 31 March, but there was a "continued slowdown" at its UK rail operation, which includes the East Coast franchise.
National Express said it had made good progress towards delivering incremental cash benefits of more than £100m in 2009. Last week, it sold its Travel London bus unit to NedRailways of the Netherlands for £32m.