EQT-backed SSP in danger of breaching debt covenants

Reports suggest that rail station caterer Select Service Partner (SSP) is in talks with its lenders, as falling commuter numbers have led to concerns that the company will breach the covenants on its £1bn debt.

SSP was acquired by private equity firm EQT from Compass Group in 2006 for around £1.2bn. Mizhuo, Dresdner Kleinwort Wasserstein and Morgan Stanley provided a debt package that included senior, mezzanine and PIK notes.

The company, based in London, operates under brands such as Upper Crust, Millie's Cookies, and Starbucks and operates more than 1,800 catering and retail outlets at airports, train stations, motorway service stations, and shopping centres in Europe, Asia, and North America. In the UK and Ireland alone, it operates more than 610 outlets at 22 airports and 115 rail stations.

Because of the economic downturn, passenger numbers on flights and trains have dramatically fallen, which directly impacts SSP's customer base. SSP made an operating profit of only £5.3m in 2008, compared with £19.5m in 2007. It has been reported that the company's bankers have asked restructuring advisers at Ernst & Young to conduct a formal review.

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