A three-month battle to keep Forge Group afloat has come to a sudden end, with administrators and receivers called in to manage the company's assets after financier ANZ Banking Group withdrew support for the engineering contractor.
A three-month battle to keep Forge Group afloat has come to a sudden end, with administrators and receivers called in to manage the company's assets after financier ANZ Banking Group withdrew support for the engineering contractor.
Forge today confirmed it had appointed Ferrier Hodgson partners Martin Jones, Andrew Saker and Ben Johnson as voluntary administrators of the company.
ANZ has consequently appointed KordaMentha partners Mark Mentha and Scott Langdon as receivers and managers.
A first meeting of Forge creditors is scheduled to take place in Perth next Friday, according to Ferrier Hodgson.
"One of our first roles will be to consider options regarding the restructure of the company," Mr Jones said.
Forge entered a trading halt this morning after being advised of the loss of support from ANZ.
ANZ played a key role in keeping the business afloat in November, after Forge disclosed a $127 million profit write-down following cost blow-outs on the Diamantina and West Angelas power station projects.
Late last year, investors wiped more than 83 per cent from the contractor's market value in a single day when it revealed the write-down after a month-long trading suspension.
The bank’s support included provision of additional working capital and deferral of debt repayments.
Forge has since disclosed further losses on the power station projects, with the total write-down on the projects set to reach up to $155 million.
The contractor now expects to record an earnings loss of up to $25 million for the 2014 financial year.
The forecast result represents a major turnaround compared with the 2013 financial year, when Forge reported earnings before interest, tax, depreciation and amortisation of more than $115 million.
Forge recently flagged that it had appointed Euroz Securities as a corporate adviser to manage third-party interest in the company.
However it said at the time that ANZ Banking Group would continue to provide overall support to the company through existing facilities.
It is not immediately clear what impact the Forge administration will have on its existing pipeline of projects, including a joint venture with Spanish contractor Duro Felguera at Hancock Prospecting's massive Roy Hill project.
Forge announced last month the joint venture had received formal notification to proceed with phase 3 works for the $1.47 billion engineering construction contract at Roy Hill.
The contract provides for around $830 million of work attributable to Forge.
A spokesperson for Roy Hill said it was too early to speculate about any potential impacts on the Forge-Duro joint venture or its relationship with lead contractor Samsung C&T.
"We are confident our long term interests will not be compromised and will continue to actively monitor the situation,” he said.
“It is important to note that Samsung C&T and Duro Felguera are both strong and financially resilient companies.”
Forge shares last traded at 91.5 cents, which had been an improvement on November when the share price had dipped as low as 28 cents in an intraday low and closed as low as 48 cents each, valuing the business at just $43 million.
That tumultuous drop came from earlier peaks in the group's value during the past 12 months which had put its market capitalisation as high as $600 million.
In late March last year, Macquarie Capital was lead manager on a $187 million block trade through which Clough sold about 31 million shares, or more than 30 per cent of the company, at $6.05 each to exit its three-year position in Forge.
The share price had peaked at $6.98 a few weeks earlier and, by June 30, was still around $4.20 per share, valuing the business at about $360 million.