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4/7/2018 — General
Banks provide waiver for Steel & Tube
By Simon Hartley

Steel & Tube Ltd (NZX: STU) - whose shares are more than 40% down on a year ago - has clinched a crucial waiver from its banks for breaching a covenant, and renegotiated its lending terms.

In late May Steel & Tube's shares plunged to a 17-year low after announcing a more than $50 million downgrade and the breaching of some of its banking covenants.

The company had expected its earnings before interest and tax (ebit) for its current full year to be similar to last year's $31 M, but that was downgraded in May to a $38 M ebit loss.

Steel & Tube also announced on Monday it had settled the sale of its Christchurch, Blenheim Rd property for $21.1 M, giving it a gain of $1.3 M on the building, which it is leasing back from the new owners, long term.

In May the company said it was seeking a waiver from its banks for the breaches. This week, Steel & Tube's 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,” Smith said.

The company’s shares had plunged almost 25% to $1.51, their lowest price in 17 years, in late May, and this week were trading at $1.45, down more than 42% on 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 included an estimated $12 M loss when Steel & Tube sells, or folds, its plastic irrigation piping division, which had a carry value of between $14 M and $15 M. The carrying value of intangible assets is expected to be down by $10 M.

Malpass said while the plastics division had been performing well, that was during construction of a large irrigation scheme, but work subsequently since dried up.

*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.

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Steel & Tube’s Mark Malpass. Source: Fairfax Media.