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AusGroup seeks bondholders' approval to amend bond covenant

ENGINEERING services firm AusGroup is seeking the approval of its bondholders to amend the financial covenant in its bonds due 2016 in case its interest coverage ratio falls below 2:1, the threshold currently provided for.

The group said the start of full operations of its Port Melville fuel facility had been delayed due to longer-than-expected environmental and regulatory approval process. While it eventually started in Nov 23, the delay may adversely affect the results of operations of the group.

The group is therefore proposing to establish an "Interest Service Reserve Account" secured in favour of the trustee for the noteholders, into which it will deposit certain amounts if the interest rate coverage ratio falls below the threshold of 2:1. The money will go towards the payment of the interest of the notes or eventually the principal amount, and will not be withdrawn by the firm even if the interest coverage ratio equals or exceeds 2:1.

AusGroup said it is confident of its ability to service all payments on the notes.