trading halt, page-112

Forge bracing for another writedown
PAUL GARVEY
THE AUSTRALIAN
JANUARY 14, 2014 12:00AM
EMBATTLED mining contractor Forge Group is set to announce its second writedown in two months when it reveals some adjustments to its finance agreements with ANZ Bank.

The Australian understands that an announcement from the company is likely today. Sources suggested the writedown would be minor in comparison with the $127 million figure that triggered a major share price slump last November.

But the group is not expected to announce an equity raising, despite widespread speculation that such a move will be needed eventually to strengthen Forge's balance sheet.

Sources said the Perth-based group had been in extensive talks with ANZ over the weekend since entering a trading halt on Friday. The new announcement is likely to detail changes to the nature of Forge's debt facility with ANZ.

In November, after the discovery of major problems at two power station construction contracts that took Forge to the brink of collapse, ANZ agreed to increase the total size of the company's working capital facility from $11m to $60m.

About $30m was said to be available immediately, with the balance made available progressively as performance guarantees were returned or cancelled.

At that time, rectifiying the issues with the power stations -- the Diamantina station in Queensland and the West Angelas station in Western Australia's Pilbara region -- was expected to cost $45m. That figure, however, was only an estimate.

Those power station contracts and associated writedown saw shares in Forge plummet from $4.18 to as low as 28.5c on the day the news was announced.

Goldman Sachs is believed to have sounded out investor interest in a Forge equity raising during the initial power station woes in November but is understood to no longer be involved. Euroz is believed to be acting as Forge's corporate broker.

Forge's share price has steadily increased from the depths of last November, climbing to as high as $1.95 a share. It last traded at $1.25 a share on Thursday.