The Interpublic Group of Companies has secured an agreement with its principal bankers to exclude from its borrowing covenants the impact of the feared bankruptcy of General Motors Corporation on Interpublic's profit before interest, tax, depreciation and amortisation (EBITDA).
The agreement reflects concerns that Interpublic agencies working on GM business may suffer bad debts if the giant motor manufacturer collapses. This in turn could have caused Interpublic to breach one or more of the profitability conditions agreed with its bankers for maintaining its current borrowing facilities.
The protection obtained by Interpublic relates both to bad debts and other adverse consequences arising from a GM bankruptcy. It is limited to a maximum aggregate cash cost of $150 million and a further non-cash cost of $100 million. Non-cash costs are likely to include any goodwill write-offs.
The deal was struck last Wednesday 13 May "solely as a matter of sound financial management", Interpublic said, and not as a result of any non-public information concerning any GM-related bankruptcy proceedings.
© Fintellect Ltd
The hiring of a senior General Motors Corporation executive to coordinate all Interpublic agency services
So far WPP has apparently avoided the consequences of the US car-makers' bankruptcies but, of the
BOB WILLOTT
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