Credit amendment provides ModivCare near-term relief, says Lake Street

Lake Street analyst Brooks O’Neil notes that Modivcare announced on October 1 that it had amended its February 2022 credit agreement, which increased the net leverage ratio covenant while subsequently reducing the minimum interest coverage ratio covenant. The amendment preemptively ensures that the company will remain in compliance with all covenants outlined in the agreement for the most recently completed fiscal quarter, for which the company has agreed to raise its interest rate margin by 25 basis points, and a long-term relief agreement is expected to support ongoing covenant compliance in the near term, which the firm believes will “alleviate many near-term concerns of investors.” The company also notably reported that the $60M in receivables in the NEMT segment that were previously delayed have now been collected, notes the analyst, who keeps a Buy rating and $30 price target on Modivcare shares.