06 January 2014

Ausgroup - Private Placement of 96.1M New Ordinary Shares @ S$0.168 each

After a disappointing result last quarter, Ausgroup finally came out with decision to propose a private placement of 96.1M new ordinary shares at unfavorable S$0.168, or 11% lower than the closing price before trading halt few days ago. In another word, it has proposed to raise about S$16M to reduce the worries of investors on breaking bank covenants issue after it has mentioned in the latest quarterly report:

During the quarter, the Group breached covenants under its banking facility agreements, as a result of the impact of the lower Earnings before Interest Tax Depreciation and Amortisation (EBITDA) on its various ratios.
In early October 2013, the banks formally advised that they reserve their rights in relation to their respective banking facility agreements. AusGroup’s financiers are ANZ and HSBC. The existing facilities were established during FY12 and provide the Group with cash advance, trade finance, overdraft and bank guarantee facilities.
As at 8 November 2013, the Group maintained cash security of $51.3 million against the banks’ exposure on the facilities comprising $23.7 million of debt and $33.2 million in bank guarantees. Since the end of Q1, the utilisation of banking facilities has reduced by $8.4 million and the Company is forecasting to continue to improve its net cash position through to 31 December 2013.
The board is considering certain strategic options to reduce the level of debt owed under the facility agreements and remains in continuing discussion with it's banks. We continue to work closely with the banks regarding these matters.
The term of the Group’s existing facilities with the banks will expire in January 2014 and the Group is currently in the process of reviewing options to replace these facilities.


So it comes to next question, whether Ausgroup can keep its momentum in capturing more projects in the field other than iron ore industry such as oil & gas industry?

The price is now moving up to 20c and above after the news was released today. We shall see if the management can overcome this crisis and regain investor confidence in next few quarters later.


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