Fletcher Building Limited (Australia)

 
Mounting losses impacting trading: Building products and construction company, Fletcher Building Limited (Australia) (ASX: FBU) has requested for a trading halt extension of its shares and capital notes on the NZX and ASX exchanges. The company had asked for trading halt last week to review the key projects in its Building and Interiors (B+I) business for the preparation of the Group accounts for the six months ended 31^st December 2017, which is still ongoing and not yet complete.
 
Particularly, FBU expects further material losses in the B+I business beyond what was provided for in October 2017. Once these further losses are determined and provided for, this will result in a breach of one or more of the covenants in the group’s financing arrangements. FBU had already started discussions with its lenders in relation to the expected covenant breaches. Moreover, to appease its bankers, FBU might resort to a capital-raising exercise or might go for selling its B+I business depending upon the company’s ability to manage projects like Auckland International Convention Centre project. FBU’s biggest source of debt funding is the private placement market at about $1.26b and it had $389m in loans through its syndicated revolving credit facility with ANZ, Bank of Tokyo-Mitsubishi UFJ Ltd, BNZ, Commonwealth Bank of Australia, Citibank, Hongkong and Shanghai Banking Corp and Westpac.
 
Meanwhile, FBU expects the trading halt to continue until the commencement of trading on 14 February 2018 when the group will be providing the market an update of its review and the status of its discussions with its lenders. On the other hand, FBU stock has risen 11.89% in three months as on February 09, 2018 and is trading at a very high level. It will be worth watching this stock, looking at the recent developments.

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