Vodafone's Australian venture came close to breaching covenants on a $3 billion loan earlier this year, but was saved by its global parents in February who paid off $173 million to its international banking syndicate.
Vodafone's talks with its bankers continue as its latest accounts show the business that operates here as Vodafone Hutchison Australia, or VHA, recorded an $899 million loss for last calendar year. This had widened from a loss of $420 million recorded in 2011.
Australia's third biggest mobile operator had a gearing ratio that "did not meet the threshold prescribed in the syndicated facility agreement" at December 31, 2012, accounts filed with the corporate regulator revealed.
To avoid a breach of its lending facility, VHA made a partial pre-payment that was funded by a pool of money provided by its parent companies - locally listed Hutchison Telecommunications Australia and the London-based Vodafone Group. VHA, which operates the Vodafone mobile network with 6.6 million accounts, secured the $3 billion loan from a consortium of 12 banks in June 2010.
A partner at a leading law firm, who declined to be named, said the fact VHA nearly breached its loan covenant was unusual for a large company with a global parent the size of the Vodafone Group.
The financial accounts also explain why VHA came close to breaching its covenants, revealing that:
■ VHA recorded an $899 million loss in 2012.
■ VHA had negative cash flow for the first time in 2012.
■ At the end of 2012 VHA had assets of $1.2 billion and current liabilities of $3.9 billion.
■It has a $1.6 billion loan due by June 2013, a $750 million loan due to parent companies in 2013, and owes a further $1.7 billion that is due some time after 2013.
However, despite these problems, VHA continues to be supported by its foreign parent companies, which have repeatedly stated their commitment to provide ongoing financial support.
A VHA spokeswoman would not comment on the financial report. "We are making significant headway in our turnaround strategy and have been very clear that this is a three-year journey, not something that occurs overnight," she said.
"Customers who have joined us over the past year have ranked us with a positive net promoter score, which is an early sign that our customer service strategy is working and we're determined to build on that."
When VHA secured the loan in 2010, former chief executive Nigel Dews described the debt raising as an opportunity for it to establish a stand-alone credit rating. "It is good to have good relationships with banks so that when other options come up we are well placed," he said at the time.
However, when there were well-publicised network problems under Mr Dews' leadership, the company lost nearly 1 million active accounts. This caused significant financial and brand damage, and led to Vodafone Group replacing the Hutchison-appointed Mr Dews with its own appointment, Bill Morrow, in early 2012.
The latest VHA accounts reveal the network operator sustained a $900 million loss in 2012, its worst performance since it was formed in 2009, and it recorded a negative cash flow for the first time.
Cash outflows were $14.2 million, compared with inflows of $627 million in 2011 and $635 million in 2010.
The reverse is cash flow was due to less money coming in from customers.