Big four exposed to Hastie collapse

AUSTRALIA'S big four banks face write-downs totalling almost $250 million in the wake of Hastie Group's collapse into receivership at the weekend.

By InvestSMART · 28 May 2012

By InvestSMART ·
28 May 2012

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AUSTRALIA'S big four banks face write-downs totalling almost $250 million in the wake of Hastie Group's collapse into receivership at the weekend.

ANZ is the lead lender in a consortium that also includes Commonwealth Bank, National Australia Bank, Westpac, Bank of Scotland, Ulster Bank, HSBC Australia and HSBC Middle East.

That syndicate of banks is owed an estimated $500 million, sources close to weekend negotiations over Hastie's future said. That debt is a 50:50 split between loans and bonds.

In total, ANZ is believed to be owed $150 million. Commonwealth Bank, with $20 million, has the smallest exposure of the Australian banks. "The other two, Westpac and NAB, fall somewhere in between," a source close to the negotiations said.

The corporate regulator is now assessing claims that a $20 million "accounting irregularity" is in the books of one of Hastie's Queensland divisions. Discovery of that $20 million black hole scuttled a refinancing deal with the banks.

"We've sent the matter to ASIC," the chief executive, Bill Wild, said on Friday. "We'll go step-by-step. We're still working on it."

Following Hastie's $150 million December-half loss, and a share price that has fallen from $2.17 to 16? in the past year, that accounting irregularity is worth almost as much as Hastie's entire $21 million market capitalisation. The employee responsible has been suspended and remains on the payroll.

The fate of 2000 other employees was sealed in weekend meetings at the company's Auburn headquarters. They will lose their jobs today as administrator PPB and receiver McGrathNicol try to salvage what they can for Hastie's staff and lenders.

"There seems to have been some window dressing of the books to make a loss look like a profit, and it dates back to 2009," a source said. "Given the problems in the company, and the high level of debt, it was the straw that broke the camel's back."

In addition to the banks, a number of major Australian superannuation funds and investment firms are licking their wounds after Hastie's demise.

Perennial Growth, IOOF Holdings, Schroder Investment, Lazard Asset Management and Mackenzie Financial all hold significant stakes. Perennial Growth, which invests on behalf of a number of superannuation funds, holds 11.23 per cent of Hastie.

Thorney Holdings, the investment arm of the Pratt family, is the second-biggest investor, with 10.6 per cent.

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Frequently Asked Questions about this Article…

How much exposure do Australia’s big four banks have to the Hastie Group collapse?

The article says Australia’s big four face write-downs totalling almost $250 million after Hastie Group went into receivership. A syndicate of banks and international lenders is owed an estimated $500 million in total, split roughly 50:50 between loans and bonds. ANZ is the lead lender and is believed to be owed about $150 million, Commonwealth Bank has the smallest reported exposure (about $20 million), and Westpac and NAB have exposures somewhere in between.

What triggered Hastie Group’s collapse into receivership?

The collapse was sparked after the discovery of a $20 million accounting irregularity in one of Hastie’s Queensland divisions, which scuttled a refinancing deal with the banks. That issue followed a $150 million December-half loss and high levels of debt, and sources allege some historical 'window dressing' of the books dating back to 2009.

Has the corporate regulator been notified about Hastie’s accounting irregularity?

Yes. Hastie’s chief executive, Bill Wild, said the matter has been sent to ASIC. The corporate regulator is now assessing claims about the $20 million accounting irregularity.

What does receivership mean for Hastie employees and the company’s future?

Administrators PPB and receiver McGrathNicol are handling the situation and trying to salvage what they can for staff and lenders. According to the article, about 2,000 employees were set to lose their jobs. The company is in receivership, so its assets and any recovery will be managed by the administrators and receiver while investigations and creditor negotiations proceed.

What does the Hastie collapse mean for shareholders?

Hastie’s shares have fallen sharply following the losses and the accounting irregularity, and the company’s market capitalisation was reported at about $21 million. While the article doesn’t predict exact outcomes, shareholders face heavy losses given the company’s recent losses, the accounting issue, and the receivership process.

Which investment firms and superannuation funds held significant stakes in Hastie?

Several major investment firms and super funds held meaningful positions in Hastie. The article names Perennial Growth (which holds 11.23%), IOOF Holdings, Schroder Investment, Lazard Asset Management and Mackenzie Financial. Thorney Holdings (the Pratt family’s investment arm) was the second‑largest investor with about 10.6%.

Who were the other lenders involved in the Hastie financing syndicate?

Besides ANZ, Commonwealth Bank, NAB and Westpac, the lending syndicate included international banks such as Bank of Scotland, Ulster Bank, HSBC Australia and HSBC Middle East, according to the article.

What immediate actions have Hastie’s management and advisers taken following the collapse?

Management referred the $20 million accounting discrepancy to ASIC, the employee allegedly responsible was suspended (and remains on the payroll), and administrators PPB along with receiver McGrathNicol have been appointed to try to salvage value for staff and lenders while they assess claims and negotiate outcomes.