ANZ to rescue after Forge's power station problems
Under the deal, the bank is to provide an immediate $60 million working capital facility, up from $11 million, while deferring quarterly principal repayments of an existing facility for the next three quarters.
Additionally, ANZ is to receive warrants equal to 13 per cent of Forge's capital.
"Liquidity is stable now ... this is a debt fix," Forge's chief executive, David Simpson, said of the deal.
The collapse in the company's share price on Thursday means Forge is unable to raise funds from equity markets any time soon.
The share price slumped after it disclosed $127 million in losses on two power station contracts, which will result in a gross loss of as much as $90 million this financial year.
Forge shares dived to close at 68.5¢, down 83.6 per cent on the day, though well clear of the low of 28.5¢.
Before the November 4 trading suspension, the shares were worth $4.18, valuing the company at $360 million. This was already well down from its September high of $6 a share.
Forge said its loss before interest, tax, depreciation and amortisation for fiscal 2014 would be $85 million to $90 million. Putting the write-down to one side, the gross profit as measured by EBITDA would be $45 million to $50 million.
Forge has encountered heavy losses on the construction of the Diamantina power station in western Queensland and the West Angelas power station in Western Australia.
In both cases, it made extensive use of subcontractors, which left it exposed to cost blowouts from contract variations, coupled with poor project management.
Typically, Forge does not use subcontractors, which allows clearer cost management of complex projects.
"I'm the CEO. I'm the head of the train," Mr Simpson said. "The board holds me responsible."
The problems with the contracts only emerged in October, which prompted a fuller assessment of the extent of the problems.
The troubled contracts were inherited from the acquisition of CTEC in early 2012, which used subcontractors extensively for the two power stations. Mr Simpson took over as CEO in mid-2012.
Forge traditionally manages the work in-house, giving it direct control over the work under way and any contract variations.
Frequently Asked Questions about this Article…
ANZ has agreed to provide Forge Group with a $60 million working capital facility, up from $11 million, and defer quarterly principal repayments for the next three quarters. This deal aims to stabilize Forge's liquidity after financial difficulties.
Forge Group's share price collapsed due to the disclosure of $127 million in losses from two power station contracts, resulting in a significant gross loss for the financial year.
The power station contracts have led to heavy losses for Forge Group, with an expected loss before interest, tax, depreciation, and amortization (EBITDA) of $85 million to $90 million for fiscal 2014.
Forge Group's financial issues were exacerbated by the extensive use of subcontractors for the Diamantina and West Angelas power stations, leading to cost blowouts and poor project management.
The acquisition of CTEC in early 2012 brought troubled contracts to Forge Group, which relied heavily on subcontractors, contributing to the company's financial difficulties.
According to Forge's CEO, David Simpson, the company's liquidity is now stable following the deal with ANZ, which he describes as a 'debt fix.'
Before the trading suspension on November 4, Forge Group's shares were valued at $4.18, but they have since plummeted to 68.5 cents, marking a significant decrease in the company's market value.
Forge Group traditionally manages projects in-house, allowing for clearer cost management and direct control over work and contract variations, unlike the subcontractor-heavy approach that led to recent issues.
Call 1300 880 160
Start a chat
Schedule a call
