Monday 12th February 2018
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Fletcher Building, which had planned to reveal bigger losses at its building and interiors (B+I) unit today, has extended its trading halt until Wednesday saying it has yet to complete a review of key projects and has begun talks with lenders about breaching covenants.
The company first had its stock and capital notes halted last week, saying it expected to breach one or more of its debt covenants because of further "material losses" at B+I. The halt was to have lifted today.
"The current expectation of the board is that there will be further material losses in the B+I business beyond what was provided for in October 2017 and that once those further losses are determined and provided for, this will result in a breach of one or more of the covenants in the group’s financing arrangements," it said in a statement today, repeating comments it made last week. "Since making the 8 February announcement, the company has commenced discussions with its lenders in relation to the expected covenant breaches."
Fletcher said the trading halt would lift before the start of trading on Wednesday, "prior to which it will provide to the market an update of its review and the status of its discussions with its lenders."
In October, chair Ralph Norris apologised to shareholders at their annual meeting for Fletcher's mistakes as the company took a further $125 million provision against problematic construction contracts including the Convention Centre in Auckland and the Justice Precinct in Christchurch and said its B+I unit would report a full-year loss of $160 million.
Its 2018 full-year earnings guidance, excluding the B+I loss, is $680 million to $720 million, suggesting full-year earnings including B+I could be as low as $520 million.
Auckland-based Fletcher had net debt of $1.95 billion as at June 30 last year. Its biggest source of debt funding is the private placement market at about $1.26 billion and it had $389 million in loans via its syndicated revolving credit facility with ANZ Bank New Zealand, Bank of Tokyo-Mitsubishi UFJ Ltd, Bank of New Zealand, Commonwealth Bank of Australia, Citibank, Hongkong and Shanghai Banking Corp and Westpac New Zealand. Undrawn bank facilities stood at $536 million.
Fletcher shares last traded at $7.77 and have tumbled 23 percent in the past 12 months. Over the past five years, as the S&P/NZX 50 Index has climbed 94 percent, Fletcher fell 13 percent and was seemingly unable to capitalise on New Zealand's building boom.
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