AusGroup dismisses insolvency warnings
Contractor AusGroup has attempted to hose down fears it may be flirting with insolvency as it seeks fresh sources of working capital before its banks withdraw lines of credit.
The share price of Singapore-listed AusGroup, which operates through subsidiary AGC, has slumped since it told the market existing facilities with ANZ Bank and HSBC Australia would expire next month.
The Perth-based construction and fabrication firm twice went into trading halts yesterday, before and after responding to a Singapore brokerage's warning it was at serious risk of insolvency.
Last night AusGroup said it would stay in a halt to allow it to finalise analysis and review of refinancing activities. An announcement was expected on Monday.
AusGroup breached banking covenants in the September quarter, for which it reported a $15 million loss. Laurie Barlow was replaced as managing director by company founder and former boss Stuart Kenny.
Cost overruns from two contracts, delays in beginning new ones and restructuring expenses were blamed.
The contractor yesterday said it had repaid its senior debt facilities and had cash backing for all bank guarantees on issue.
At November 8, it had $24 million of debt and $33 million in guarantees.
At September 30, AusGroup had net cash of $26 million.
AusGroup chairman Kia Ngee Chew said the company had cash to meet it working capital needs above that used to back all its guarantees.
"The group is undergoing a planned market-led process for participants to provide working capital and contract bonding facilities in early 2014," Dr Chew said. "The repayment of all senior debt is seen as a positive to ensure that any incoming lenders had a clean balance sheet."
He said a $40 million increase to $219 million in the order book since September 30 was evidence its focus on the oil and gas sector was gaining momentum.
But broker OSK-DMG said the size of the order book was insufficient for even two quarters of breakeven performance. It tipped continued losses in 2013-14 and said this was "the most dire chapter in AusGroup's history".
The company's shares last traded at S20c yesterday, down S3c, or 13 per cent at four-year lows.
