trading halt, page-105

FEARS that troubled Perth-based mining and engineering contractor Forge is about to dump more bad news have eased, with its trading halt tipped to lead to a recapitalisation plan to placate its banker ANZ.

Forge went into a trading halt on Friday pending an announcement this week, which it said would provide a "material update" on its financial position, which is under pressure after the November bombshell that it would take a $127 million profit hit in completing the Diamantina and West Angelas power stations in Queensland and Western Australia, respectively.

In addition, Forge had to find $45m to complete the projects, squeezing its liquidity position and forcing a new deal with ANZ under which a working capital facility was expanded from $11m to $60m, with certain debt covenants and principal repayments also waived.

Analysts said yesterday that the ANZ deal, and the sharp rebound in Forge's share price since -- due in part to the signing of a work contract for Gina Rinehart's Roy Hill iron ore project -- meant Forge was likely to be looking to an equity raising, or the introduction of a cornerstone investor/contracting group looking to take advantage of the group's battered share price.

Forge has previously explored a potential capital raising and alternative funding arrangement but abandoned them when ANZ came to the rescue. At the time, Forge said the ANZ deal would "solve the liquidity issues and strengthen Forge Group's balance sheet".

Forge chief executive David Simpson also said at the time that the ANZ's funding support gave Forge the "flexibility to continue to trade on a business-as-usual basis and deliver on our current work in hand".

"Additionally, it underpins our future growth and tendering prospects, " Mr Simpson said.

Forge also claimed at the time that it had acted quickly to quarantine the power station contract woes from the broader business.

Still, some analysts said on Friday that the latest trading halt could again be related to more bad news from Forge's other contracts. But that was the minority view.

Forge traded at $1.25 ahead of Friday's trading halt. Its shares plunged from $4.18 to as low as 28.5c when it shocked the market in November with its power station contract losses.

The recovery in the Forge share price since means an equity issue would be more palatable than was the case in November. But Forge is still well short of the $6.90 a share level it commanded in March last year.