Beleaguered Steel & Tube - whose shares are down more than 40% on a year ago - has clinched a crucial waiver from its banks for breaching a covenant, and has renegotiated its lending terms.
In late May, Steel & Tube's shares plunged to a 17-year low after the company announced a downgrade of more than $50million and that it had breached some of its banking covenants.
Steel & Tube had expected its earnings before interest and tax (ebit) for its current full year to be similar to last year's $31million, but that was downgraded in May to a $38million ebit loss.
Steel & Tube also announced yesterday it had settled the sale of its Blenheim Rd, Christchurch property for $21.1million, giving it a gain of $1.3million on the building, which it is leasing back from the new owners long term.
Steel & Tube said in May it was seeking a waiver from its banks for the breaches.
Yesterday, Steel & Tube chief financial officer Greg Smith said the company had obtained a waiver from its banking partners for the covenant breach, which arose from the signalled non-trading write-downs and impairments on its full-year 2018 earnings.
``Steel & Tube confirms that formal documentation on terms satisfactory to the company are now in place,'' Mr Smith said in a market update.
Steel & Tube shares plunged almost 25% to $1.51 in late May, their lowest price in 17 years, and yesterday were trading at $1.45, down more than 42% compared with a year ago.
New chief executive Mark Malpass, appointed in February, was confident in May the company would be back in profitability in full-year 2019, with savings from restructuring and new systems.
The impairments and costs include an estimated $12million loss if Steel & Tube sells, or closes down, its plastic irrigation piping division, which has a carry value of between $14million and $15million. The carrying value of intangible assets is expected to be down $10million.
Mr Malpass said while the plastics division had been performing well, that was during construction of a large irrigation scheme, but work had since dried up.
