Euro-Nat. expects loss on Judge deal

Press, 3 December 1987, Page 31

Euro-Nat. expects loss on Judge deal

Euro-National Corporation expects to incur a loss of $9O million owed to it by Judge Corporation after their trading early this year in Kupe Group shares.

Euro-Natlonal’s directors disclosed yesterday that they were In negotiation with Judge and other secured creditors in a bid to minimise losses.

Their disclosure came with an interim profit report from Euro-National which shows a trebling of net total earnings to $20,204,000, from $6,035,000 in the six months to September, 1986.

But the directors included a 42 per cent lowering of their full year profit forecast to S3SM, from a S6OM figure given at the company's annual meeting in August

The lower forecast was before extraordinary losses expected from the deal with Judge, the directors said.

It reflected the impact of the sharemarket crash on trading in EuroNational’s equity portfolio.

The directors refused to quantify losses or potential losses directly from the crash or from the Judge situation, which they said was subject of “sensitive discussions.”

The ISOM debt is outstanding on the 5234 M sale to Judge of a 47 per cent stake in Kupe bought

by Euro-National last February from McConnell Dowell Corporation and Mr Graham Hamilton.

The sale to Judge was on the same terms as the Euro-National purchase and the bulk of the sum owed was paid in June. Euro-National’s directors said indications were that Judge could not meet a schedule for equal instalments of the $9O million later this month and mid-March. The deal involved Judge giving Euro-National collateral in the form of some Kupe shares. But the directors said the sharemarket crash had diminished the value of that collateral and a loss must be expected. They said that EuroNational had to pay S9OM on the same settlement dates to McConnell Dowell to complete its purchase of the 47 per cent of Kupe. “In anticipation of not receiving funds on due date from Judge Corporation, cash resources have been allocated to meet these commitments to McConnell Dowell,” the directors said.

Euro-National had maintained close contact

with Judge and that had culminated in discussions with other secured creditors starting late last month, after the appointment of the task force to review Judge’s position.

The directors indicated the company may also face losses arising from transactions in which Impala Pacific, controlled by the Judge affiliate, Ariadne Australia, took a 26 per cent holding in EuroNational.

Impala Pacific took 26 per cent of Euro-National by subscribing for new capital and purchasing shares from EuroNational Equities, which only later became a subsidiary of Euro-National Corporation.

The Euro-National directors said the funds were received in June. However, they added that part of the deal was EuroNational agreeing to accept a put-option in respect of shares in Harmony Securities, a Cook Islands-based company formed on instructions by the Caxton group of Mr John Spencer. “This put-option has not yet been put, but at this time the directors feel it is prudent to provide in

full for any losses which may be incurred, because particular transactions which Harmony had arranged have not been consumated at this date,” the directors said Furthermore, they said in a late development, interests associated with Caxton were to acquire 20 per cent of Euro-National from Impala Pacific. “This transaction was due for settlement on November 30 and remains unsettled despite concerted attempts to complete.” Discussions were continuing with Impala Pacific. Euro-National’s profit was on gross revenue up from $20.5M to $72.7M, ($20,499,000) and after a $1,817,000 deduction for minority interests ($374,000 previously). Euro-National had a pre profit of $25,558,000 ($6,357,000) on which it made a provision for tax of $3,551,000 (nil). In addition to the deduction for minorities, the company had a $14,000 gain from its share in the profits of associate companies ($52,000). No dividend recommendation was made in the report.