HST 0.00% 16.0¢ hastie group limited

capital raising

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    http://www.smh.com.au/business/hastie-hopes-cash-will-cool-the-engine-20110216-1awlv.html

    Get set for an equity issue by the airconditioning and refrigeration contractor Hastie Group, which called a trading halt yesterday while it worked with Macquarie Bank to negotiate a deal with its lenders.

    Hastie is not in the same trouble that Frigrite found itself in just before its demise last month (more on that below), but given that Hastie's results were due next Monday it has clearly decided its balance sheet strength is not as it would like.

    The market has been hammering Hastie since its chairman, Trevor Bourne, and chief executive, David Harris, broke the news to shareholders just before Melbourne Cup day that trading was choppy and that matching last year's profit results was dependent on coming home with a wet sail in the second half.

    Advertisement: Story continues below The shares sank from near $1.60 to about 90? before finding a bottom in December after the company said its lending syndicate had agreed to give more wriggle room in complying with three covenants on borrowings. This was contingent on shareholders taking an interim dividend cut from 5? to 3? a share.

    Hastie's board, having seen the December-half trading outcome, has apparently decided that rather than having to go cap-in-hand every quarter to its dozen banks around the world (led by ANZ) for an extension of the more flexible covenant terms, it would look at whether some form of capital raising could appease banks and investors.

    Those inside the tent do not think this contradicts the results briefing in August that after refinancing $154 million in debt no borrowing was due before April 2013.

    Hastie has not breached any of its covenants, but the December renegotiation indicated a sharp change in circumstances. As an example, interest cover then was four times, better than the required covenant ratio of under three times, but by December that was loosened to allow cover of less than 2.75 times.

    Yesterday's statement that it was talking to its banks about ''its financial performance and any implications for its capital structure'' could mean that Hastie's earnings will fall below last year's levels.

    If, for example, the 3? interim dividend is annualised, and Hastie maintains its habit of paying 40 per cent to 60 per cent of earnings as dividends, that implies at best a profit of $35 million to $40 million, compared with $40.5 million last year.

    Investors will know more, hopefully, tomorrow when Hastie is due to report back to the Australian Securities Exchange.

 
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Currently unlisted public company.

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