Service Stream shares fall sharply

Specialist telecoms construction firm Service Stream Ltd has continued to feel the after-effects of losing a key National Broadband Network (NBN) contract as the firm's share's tanked 25 per cent Thursday.

Service Stream shares closed at 16.5 cents, down 5.5 cents, or 25 per cent.

The NBN builder said in a statement to the ASX that it has breached the gearing ratio covenant under its banking facility agreements.

The company’s existing agreement with its financiers – ANZ Banking Group and Westpac – requires that its gearing ratio of net debt plus banking guarantees and rolling 12 months earnings before interest, taxes, depreciation and amortisation (EBITDA), doesn’t exceed 3:1.

Service Stream is in discussion with its financiers to gain an extension of the facilities, with the NBN contactor seeking a waiver of the covenant breach and amendments to the covenants to apply going forward.

The existing two-year multi-option banking facilities were established in May last year and Service Stream said it was confident that an agreement can be reached before June 30, 2013. The company is forecasting a net debt position as at 30 June 2013 of around $40.0 million, with bank guarantee utilisation unchanged.

The firm's shares have taken a beating since the Syntheo joint venture it runs with Lend Lease lost a lucrative contract, worth up to $341 million, to build the NBN in the Northern Territory.

Lend Lease weathered the lost contract much better, as its larger size and reduced dependence on the NBN for work allowed it to absorb the disappointing news.

However, Service Stream has been hit hard. In the previous session alone the 25 per cent share drop saw its major shareholders lose significant wealth.

The Pratt family's Thorney Investment Group lost $2.8 million on its 18 per cent stake, according to The Australian, while Service Stream executive director Brett Gallagher lost $500,000. 

With Supratim Adhikari

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