ANZ Bank could emerge as the largest shareholder in Forge Group following a deal which has allowed the troubled engineer to continue trading.
Under the deal, the bank is to provide an immediate $60 million working capital facility, up from $11 million, while deferring quarterly principal repayments of an existing acquisition facility for the next three quarters.
Additionally, ANZ is to receive warrants equal to 13 per cent of Forge’s capital.
‘‘Liquidity is stable now ... this is a debt fix,’’ Forge’s managing director, David Simpson said of the deal with the bank.
The collapse in the company’s share price means it is unable to raise funds from equity markets any time soon.
Shares in the company slumped as much as 90 per cent after the company booked $127 million in losses on two power station contracts, which will result in a gross loss of as much as $90 million this financial year.
In afternoon trading, Forge shares were at 72.5 cents, down $3.45.5 but well clear of the low of 28.5 cents touched earlier.
Before the November 4 suspension, it last traded at $4.18, valuing the company at $360 million, swell clear of its September high of $6.
Forge this morning flagged a gross loss of up to $90 million for the year to June, as it bleeds heavily on losses encountered on two power station contracts.
As a result, the company has signalled a heavy write-down of $127 million.
At the same time, liquidity has been pressured, forcing it to increase borrowings from ANZ.
The company said its loss before interest, tax, depreciation and amortisation for fiscal 2014 will run at $85 million to $90 million.
Putting the write-down to one side, the gross profit as measured by EBITDA would be $45 million to $50 million, it said.
Forge has encountered heavy losses on the construction of the Diamantina power station in western Queensland and the West Angelas power station in WA, which has forced it to seek additional funding from ANZ to maintain liquidity levels.
At the same time, the group had been seeking to raise funds from shareholders, or from a strategic investor, but those plans have failed to progress.
At the Diamantina power station, Forge blamed cost overruns in structural, mechanical, piping and electrical works, along with poor project management and delays in settling a number of claims, as well as "significant acceleration costs" to get the project back on schedule.
In WA, it said the power station needed a significant degree of reworking due to design problems, poor project management and a large number of extension of time claims that have not yet been settled.