30th Sep 2013 07:36
LONDON (Alliance News) - Albemarle & Bond Holdings PLC's new Chief Executive Chris Gillespie has a turnaround job on his hands after the pawnbroking and jewellery company Monday warned that the fall in the gold price has created uncertainty over its prospects this year and means it could breach earnings-based covenants on its debt agreements.
It said it has been talking with its banks about the covenants and a revised banking package, and is in active discussions with its largest shareholder about underwriting a rights issue that would help resolve the issues.
In a trading update, the company said profit before exceptional items is within the range of market estimates for the last financial year ended June 30, but it is uncertain about its profits in the current year due to the gold price decline.
It has already moved to cut costs, including closing 33 unprofitable pop-up gold buying stores.
It said it has been in talks with its lending banks with respect to the covenants on its GBP65 million banking facilities and the banks have agreed a one-month referral of the next covenant tests to the end of October.
"Whilst the company's current level of net debt is well within these facilities at circa GBP51 million, the earnings based covenants are at high risk of being breached at the testing dates due in the current financial year," it said in the trading statement.
Albemarle & Bond has also been in talks with EZCORP International Inc., its largest shareholder, about possibly underwriting a rights issue of about GBP35 million, which if undertaken, would resolve the covenant issues and shore up its balance sheet.
"Accordingly the company has been preparing to conduct a rights issue and attempting to negotiate a revised banking package and underwriting terms acceptable to both EZCORP and the lending banks," it said.
It said it was in the final stages of the talks, but warned there can be no certainty a deal will be done. It said it would give an update on the situation within 48 hours.
The news comes as it separately announced that Gillespie, 50, would be its new chief executive.
"Chris has led a number of businesses in the broader financial services and lending area, including within HFC Bank and Bradford & Bingley before joining Provident Financial in 2007 as Managing Director, Consumer Credit Division," the company said.
Gillespie will join the company October 7 and take operational control when he's appointed to the board October 18. Greville Nicholls will revert to his formal role of non-executive chairman.
"I am confident that Chris' consumer financial services and lending background, together with his board level management and leadership experience, will be significant contributors to begin turning around the business," Nicholls said in a statement.
Albemarle & Bond shares were down 47.2% at 65.957 pence early Monday, the biggest decline on AIM.
By Steve McGrath; [email protected]; @SteveMcGrath1
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