HST Hastie Grp Fpo

Engineering group Hastie Group Ltd. (HST.AU) entered voluntary administration Monday, putting thousands of jobs at risk in Australia and the Middle East where some operations will be suspended immediately.

Hastie, which operates in Australia, New Zealand, the U.K., Ireland and the Middle East, with a total of around 7,000 employees, including 4,000 in Australia, folded after the company's directors failed to secure a refinancing deal with their lenders. Its mechanical, electrical and plumbing businesses, known as MEP businesses, in Australia and the Middle East--which comprises 33 of the 44 subsidiaries placed into administration--will be suspended while their finances are assessed, administrator PPB Advisory said.

"There are insufficient funds to enable the administrators to operate the MEP companies," PPB said in a statement. The MEP businesses employ about 2,700 Australian workers and 2,000 workers in the Middle East.

Hastie's troubles surfaced late last week when the company announced accounting "irregularities" in its Services Group - Northern Region business while in negotiations with banks and investors to extend its loans.

"Based on limited investigations, these accounting irregularities will give rise to a charge to profits for the current financial year in the order of A$20 million," the company said at the time. The company had already recorded a 3 million Australian dollar (US$2.9million) hit after problems were discovered in its accounts for the six months ended Dec. 31., in which Hastie reported a loss of A$149 million. The company was worth just over A$1 billion at the end of the 2007, before the financial crisis hit the commercial building sector. When Hastie's shares last traded, on April 13, the company's market capitalization totaled just A$22 million.

"The company had tried to do a recapitalization and work through its problems but that just didn't happen," said PPB chairman of partners Ian Carson, adding that Hastie's debt may have amounted to 500 million Australian dollars (US$492 million).

"We've had some of the vendors... come to us saying they want to buy back some of those businesses... and that would be good for jobs. It's very complicated with 44 companies in the group, though. I think that there'll be a substantial number of lenders who don't get their money back," said Mr. Carson.

Australia & New Zealand Banking Group Ltd. (ANZ.AU) is the leader of a consortium of banks involved in Hastie's refinancing, which includes Commonwealth Bank of Australia (CBA.AU), National Australia Bank Ltd. (NAB.AU) and Westpac Banking Corp. (WBC.AU), HSBC Holdings PLC (HBC), Lloyds International and Ulster Bank, which is owned by the Royal Bank of Scotland Group PLC (RBS.LN).

ANZ agreed to the refinancing proposal but Westpac and CBA--which between them own around 30% of the Hastie's debt--have knocked back the initial plan, according to a person familiar with the matter. Hastie needs unanimous agreement from its creditors to proceed. A spokesman for Westpac confirmed that bank's involvement but declined to provide details.

One ray of hope for the embattled builder could again be an injection from private equity. Last year Australia's Lazard Private Equity invested around A$50 million to take a 25% stake in Hastie as part of a A$170 million refinancing effort. This time international major KKR has also been touted as taking an interest, said the person familiar with the matter, although he emphasized that nothing substantial had been decided.

A spokesman for KKR declined to comment.

Investment bank Macquarie Group underwrote the group's initial public offering in 2005, which priced Hastie at A$1.52 a share. The stock last traded at 16 Australian cents a share.

PPB's Mr. Carson said the administrator will meanwhile be "urgently" assessing Hastie's existing construction contracts. In February, Hastie said it had recently been awarded new major projects by companies including Multiplex, John Holland and Hansen Yuncken.

The U.K. and Ireland divisions are profitable stand-alone operations and will continue to trade as normal as attempts are made to sell them as going concerns, he added.

Advisory firm McGrathNicol has been appointed as the receiver for 11 companies across Hastie's refrigeration and maintenance services divisions in Australia. These include Hastie's Spectrum Fire and Safety, Hastie Services, Gordon Brothers Industries and Austral Refrigeration businesses.

Partner Peter Anderson said the firms will continue to trade on a "business as usual" basis as they are prepared for sale. "We do not expect to make any significant structural changes to the businesses or their work forces," Mr. Anderson said.

-By Rhiannon Hoyle, Dow Jones Newswires; 61-2-8272-4625; rhiannon.hoyle@dowjones.com

(Gavin Lower, Caroline Henshaw, Gillian Tan and Rachel Pannett contributed to this article.)

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