Published 31 January 2010
BOS International (Australia) Ltd has told Geneva Finance Ltd it’s unlikely to extend its $35 million facility in full when it matures on 30 April 2011.
Geneva breached some of its banking covenants in 2008 but secured agreement “on commercially acceptable terms, including an ongoing process of review of performance against agreed milestones” at the end of 2008.
In its interim report, out on 28 January, Geneva said of BOSIAL’s new position: “To be proactive in dealing with this, Geneva has entered into discussion with BOS regarding a revised lending strategy. This strategy requires a lower level of lending, which impacts future profit forecasts.
“As a consequence of these re-forecasts it has become prudent to reduce the deferred tax asset by $3.2 million which, in turn, has created a technical breach of the BOS minimum equity covenant. This breach is of a technical nature because the underlying deferred tax asset remains available for the future benefit of the group. BOS are fully aware of this technical breach. “The discussions with BOS are commercially sensitive, but the board are confident of achieving an outcome that is in the best interests of all stakeholders. In the interim it is considered appropriate that this facility is disclosed as being due within 6 months. At the time of this report the BOS facility remains fully available.”
Geneva entered a moratorium in November 2007 and turned that into a capital reconstruction in April 2008. In the interim report out this week, managing director David O’Connell said: “The transformation of Geneva’s operating activities is now largely complete. The company now has a centralised, low-cost operation. Its product range has moved away from the high-interest-rate, high-risk sector to a more mainstream customer. The rebuilding of lending volumes, while maintaining asset quality, is the key operational priority. During the period, the focus on reducing operating costs has been maintained. As a consequence, the business has again lowered annual overhead costs in the current period by the equivalent on $7.3 million/year.”
Mr O’Connell said the economic climate continued to make life difficult: “Funding is the key business issue. Changes to financial markets on both the global stage and within New Zealand have made it difficult to secure long-term funding and it remains difficult to predict the extent to which the current recession will impact the company’s ability to collect the ‘Old ledger’. Despite this, the group has made significant progress in developing the new business model. Successfully resolving the funding issues creates the opportunity to significantly enhance shareholder value.” Since the moratorium began in November 2007, Geneva has repaid debentureholders $62.7 million in interest & principal, including $48 million (50%) of the principal owing at the time of the moratorium. Total interest & principal repaid represents 64.7% of the outstanding principal at the time of the moratorium. Subordinated noteholders have been paid interest of $1.7 million, equating to 17.4% of the outstanding principal at the time of the moratorium.
16 December 2009: Geneva makes second half-year pretax profit
14 June 2009: Geneva looking better, but not the forecast much better
11 January 2009: Geneva reports a loss – but has eye on opportunities
1 December 2008: BOS reconfirms Geneva funding
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Attribution: Company release, interim report, story written by Bob Dey for the Bob Dey Property Report.