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Steel & Tube gains waiver from lenders after writedowns led to covenant breach

Monday 2nd July 2018

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Steel & Tube Holdings said it has obtained a waiver from its banks after writedowns and impairments put it in breach of at least one lending covenant.

In May the Lower Hutt-based supplier of steel building products said it expected a loss on an earnings before interest and tax basis of about $38 million in the year ended June 30 as a result of costs and impairments of as much as $54 million. Steel & Tube reviewed its business under the guidance of a refreshed board and new chief executive Mark Malpass, who started in February.

The review resulted in writedowns from selling the company's plastics business, inventory from its new enterprise resource planning (ERP) system, and other intangibles. Steel & Tube stock plunged after the announcements last month and last traded at $1.45. The stock dropped 42 percent in the past 12 months while the S&P/NZX 50 Index gained 16 percent.

The company "has obtained a waiver from its banking partners for the covenant breach arising as a consequence of the signalled non-trading write-downs and impairments on its FY18 earnings," it said today. "Steel & Tube confirms that formal documentation on terms satisfactory to the company are now in place."

Separately, Steel & Tube said its 2018 results would include a $1.3 million gain on the $21 million sale of its property 375 Blenheim Road in Christchurch, which settled last Friday. It hadn't included the gain in the forecast loss it gave last month. The company will lease back the site.


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