Nuplex shares faced big fall, says Securities Commission

Nuplex managing director John Hirst. Photo / Richard Robinson

Shares in resins manufacturer Nuplex would have plunged by as much as 30 per cent had the company informed the NZX it was in breach of its banking covenants when the information first became available to its directors, the Securities Commission claims.

The commission says that between December 2008 and February 2009 Nuplex, and a group of its former and current directors, breached continuous disclosure rules.

Nuplex managing director John Hirst said last week the company and its directors would "vigorously defend" the allegations.

A statement of claim filed by the commission last week in the High Court at Wellington, obtained by the Herald, claimed that on November 16, 2005, Nuplex agreed cash advance facilities with Westpac Institutional Bank, the Commonwealth Bank of Australia, HSBC and Citibank for the provision of A$350 million.

The commission claimed these agreements came with a number of financial covenants, one of which required Nuplex to ensure - unless the banks consented in writing - that the Senior Debt Cover Ratio (SDCR) would not exceed three times.

The commission alleged that "on or about" December 17, 2008, Nuplex realised the SDCR for the period ending December 31 would reach 3.30, placing the company in breach of its covenant.

The statement then claims that on December 22, 2008, Nuplex advised its banks of the breach and "proposed a change to the method of calculating the SDCR that would not result in the SDCR exceeding three times".

According to the statement the banks advised Nuplex that they would be unable to respond to its request until late January 2009. When they finally did the request was denied and a "re-setting" of the SDCR considered.

The commission claimed the NZX was not informed of the alleged breach at that time. "Had the information about the forecast breach been released, the price of Nuplex's shares would have decreased by up to 30 per cent," the statement claimed.

According to the statement, on February 26, 2009, Nuplex announced its half year financial results that stated that at December 31, 2008, the SDCR was 3.46 times - a breach of covenant.

Nuplex's announcement it was in talks with its banks over its cash advance facility caused the company' share price to drop 30c in one day.