New Zealand’s largest construction company Fletcher Building Ltd (NZX: FBU) confirmed that its bankers have given it more time to negotiate new terms, after it breached its borrowing agreements.
Radio New Zealand reported that the breaches followed nearly $1 billion of losses from its Building & Interiors division, caused by cost overruns and delays on major projects, including the International Convention Centre and Christchurch's Justice precinct.
Radio NZ said the bankers have given Fletcher an extension until the end of May so the parties can negotiate new terms.
“Progress has been made in discussions with the lenders on amendments to the funding arrangements and the company will provide a further update once these are finalised,” Fletcher Building reported to the NZX.
Fletcher Building reportedly has about $2.2 billion in debts, but total borrowing facilities of $3.1 B. However, according to Radio NZ, investment advisors have said Fletcher Building's financial troubles were far from over and it will likely need to sell assets or raise capital to reduce debt.
Fletcher Building chief executive Ross Taylor previously said the renegotiation of the banking covenants should not lead to higher interest costs, and the company had more than enough money.
Taylor said in a Radio NZ business interview last month: “We are looking to do get the covenants reset, more in line with how our business actually operates. And no, we aren't expecting any costs, but you can never second guess what the banks will or won't ask for.”
The company also reaffirmed it is trading in line with expectations for a full year underlying profit of between $680 million to 720 M, excluding a loss of $660 M from the construction business.