More problems for Leighton Holdings and Hastie Group yesterday.
Leighton saw ratings group, Standard & Poor’s place the company on CreditWatch with negative implications following the company’s full-year profit downgrade on Monday and capital raising.
The move followed a similar move by Moody’s Investors Service on Monday.
And Hastie Group, which revealed a big loss after revealing falling margins in its December half year results and over $100 million of asset impairments and writedowns, saw it shares plunge more than 70% yesterday.
Hastie’s shares closed at 24.5c, 68c down on the level back in February when the company asked for its shares to be suspended while it talked to banks about its debt and financial position.
That’s a fall of 73.5%.
The shares touched an all time low of 24c as more than 79.8 million shares were traded (and there were a lot of willing buyers at the low prices), or around 30% of the company’s issued capital.
The company is worth around $58 million, against more than $220 million in February.
According to yesterday’s knee jerk reaction to Monday’s bad news, the company has no value.
The company had long term debt of $263 million at June 30 last year.
Lenders have every right to be concerned, as should employees.
We won’t know the damage to the Leighton share price until tomorrow when trading is expected to resume tomorrow.
S&P’s warning affects Leighton’s ‘BBB’ long-term and ‘A-2’ short-term corporate credit ratings as well as the ratings on the construction company’s debt issues.
"The CreditWatch placements follow Leighton’s downgraded profit forecast for fiscal 2011, amid writedowns at some of its Australian and Middle Eastern projects, and the company’s proposed equity raising," the S&P statement said.
"Although the proposed equity raising will bolster Leighton’s capital structure, we expect the company’s funds from operations (FFO)-to-debt ratio in fiscal 2012 to be weaker than our expectation for the ‘BBB’ rating," Standard & Poor’s credit analyst Craig Parker said.
"We expect to resolve the CreditWatch within 90 days, with rating pressure on Leighton likely limited to one notch."
Earlier, Moody’s placed the Baa1/Stable rating of Leighton on review for possible downgrade, pointing to the issues stemming from the earnings revision. Moody’s noted, however, that the proposed capital raising will "substantially temper the weakening in the company’s credit profile."
S&P said "Leighton’s ability to counter further unexpected shocks to its cash flow will be addressed in our review, and we will seek to understand the strategies that Leighton plans to employ and the cash buffer that the company would maintain if further shocks eventuate. Given the substantial size of the writedowns announced, and those previously taken on Leighton’s Middle Eastern investment, we will also seek to understand Leighton’s long-term strategy toward its Middle East presence.
Mr. Parker added: ‘We are also monitoring Grupo ACS’s shareholding in Hochtief AG (Leighton’s parent) amid concerns that Grupo ACS’s increasing ownership stake may have implications on the business and financing strategy of Hochtief. In our view, Hochtief’s business profile and financial metrics are weaker than Leighton’s on a standalone basis.’
And after Monday’s mad speculation in BHP Billiton and Woodside shares, a reassessment yesterday.
Woodside shares tumbled $1.33 or 2.7% to $46.83 as oil prices fell and investors realised that BHP is not interested, at the moment.
And BHP shares fell 1.3% or 66c to $48.89.
