banks' hastie losses rising ...

If I remember correctly Westpac was reported to be the bank that led the syndicate on the decision of appointing receivers. I wonder if they've mis-calculated on the potential losses. I hope they will now also take the lead in bringing to justice those who cooked the books. I wonder if they sue the auditors whether/how it would impact the likelihood (and the outcome) of a shareholder class action.

http://www.theaustralian.com.au/business/profit-loss/banks-hastie-losses-rising-as-costs-climb-as-contractors-call-in-performance-guarantees/story-fn91vch7-1226432244939

Banks' Hastie losses rising as costs climb as contractors call in performance guarantees
BY: RICHARD GLUYAS From: The Australian July 23, 2012 12:00AM

Source: The Australian
THE big four banks' losses on their Hastie Group exposures are set to escalate as builders working on incomplete Hastie projects start calling on performance bonds backed by the collapsed group's lenders.

The banks issued about $215 million in contract performance guarantees, including $120m in Australia and a further $95m in the Middle East, out of a total of $530m of Hastie exposures in May, when PPB Advisory chairman Ian Carson was appointed administrator of the engineering services company.

PPB Advisory has since sold a number of Hastie assets and businesses.

It is understood that about $37m of bonds were issued in relation to those businesses, and full performance of the underlying contracts is considered likely.

Contractors have already made calls on about half the remaining $80m-$85m in bonds issued in Australia.

The administrator has told those parties to complete the work and then provide a full account of their losses, before any payment under the bonds is authorised.


PPB Advisory is expected to retain quantity surveyors to ensure that all the claims are fair and reasonable.

The ANZ was Hastie's house lender and the syndicate agent.

It has the biggest direct exposure to the group -- about $70m, not including performance bonds -- but the bank has previously said it has "adequately provided" for any losses.

Westpac has the next biggest chunk of Hastie debt at $57m, followed by National Australia Bank ($27m) and Commonwealth Bank ($19m).

It is understood that performance bond liabilities are allocated on a pro-rata basis.

The appointment of administrators to Hastie followed the discovery of $20m in accounting irregularities, identified when the group was trying to recapitalise for the second time in less than a year.

Hastie blamed current and former senior management for the irregularities, which date back to the 2009 financial year.

Previously, the company raised $160m in a restructuring that attracted high-profile investors, including Lazard Private Equity, Perennial and Schroder Investment Management.

More than 100 creditors who attended meetings around the country last month were told to expect minimal, if any, returns.

More than $30m has been raised from sales by the administrator, which included commercial plumber Cooke & Carrick, D&E Air Conditioning and M&H Air Conditioning.

As to the Middle East, it is believed that contractors have already called on about 30 per cent of the performance bonds issued.

The same procedure will be followed in the US as in Australia.

Builders and other contractors will be asked to submit detailed accounts on completion of the projects, which will then be verified by PPB.

Former chief executive Bill Wild, hired last October to revive Hastie, launched a scathing attack on the governance and strategy of the company after it collapsed.

He questioned the logic of running "a gaggle" of companies that all reported independently.

"From a management point of view, it was a complete disaster," he said.