Heating and cooling system specialist Modine Manufacturing expects a third quarter loss and has said it had reached a tentative agreement with lenders to amend its debt covenants.

The company said it expected to report an operating loss in a range of US$55m to $58m for the quarter.

Net sales were down 24% to $365m. Analysts were expecting revenue of $401.9m for the quarter, according to Reuters Estimates.

Modine has been hit hard by the prolonged slump in the automotive market in Europe, which accounts for almost half of its net sales, the news agency said.

In a statement, the company said as of 31 December, 2008, it was not in compliance with a debt covenant, which constituted a default under the agreement with lenders but had received written confirmation from lenders and note holders for a waiver on the default.

The company indicated that if it was unable to finalise the waiver and obtain alternative financing, there would be substantial doubt about its ability to continue as a going concern.

At the end of December, Modine had cash of $73m. According to the agreement with lenders, the company cannot borrow on its existing revolving credit facility until it gets a waiver, Reuters said.