Bridger Aerospace Group Holdings (BAER), a provider of aerial fire suppression and wildlife management services to governments, will soon likely violate its debt covenants. Though in compliance as of September 30th, Bridger revealed it anticipates being in violation of its debt service coverage ratio (DSCR) and liquidity covenants during the twelve-month period subsequent to its latest quarterly filing.

Bridger blamed the anticipated breach on lower than expected revenues and cash.

It’s not clear to us the aforementioned covenants have teeth.

Other than non-payment of principal or interest, no event of default shall be deemed to have occurred so long as Bridger implements a remediation plan within 30 days of non-compliance and management diligently prosecutes the remediation plan to completion.

Subsequently, in November 2023 Bridger put forth a cost reduction plan to remedy the anticipated covenant breaches in 2024. It’s not clear in the company’s latest filing whether a deadline for completing the remediation plan exists:

“... this plan is in progress and there is no assurance that management will be able diligently prosecute the remediation plan to completion, and the Company does not have sufficient liquidity to fund its outstanding obligations for the 2022 Bonds if they became immediately due and payable following subsequent compliance reporting dates.”

If unsuccessful and the bonds are due immediately, Bridger would owe the unpaid portion of the issuance that totaled $160 million.

The bonds in question— $160 million at issuance— would become immediately due and payable if the company’s remediation plan is not successful.

Should this occur, Bridger warned it would raise substantial doubt about the company’s ability to continue as a going concern.

The company has $19.3 million in cash.

Its free cash flow burn— Operating cash flow less PPE purchases— was ($23.4) million in the latest quarter.

Separately, Bridger recently leased two planes from its CEO Timothy Sheehy.

The associated lease liabilities total $6.5 million.