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| Subject: Mr Fogarty said yesterday ERG would prefer get project financing | |
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Author: final structure whether sat balance sheet talks-financiers |
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Date Posted: Sunday, February 23, 03:41:29am In reply to: http://www.patersonord.com.au/ ERG 03 Dec 2002 's message, "  " on Wednesday, February 19, 07:19:03am------------------------------------------------------------ Posted by: CATDOG Feb 22 2003 2:15:11:373AM ----------------------------------------------------------- Fogarty for all seasons? ----------------------------------------------------------- IS Peter Fogarty the problem or the solution for ERG? If the view on the street is anything to go by, he is fair bit of both. ----------------------------------------------------------- He has been at the helm of ERG for all of its 19 years and has presided over some its great triumphs - as well as its great disasters. ------------------------------------------------------------ It seems the corporate Houdini could get ERG out of deep trouble once again - but at great cost to shareholders, who are poised to be diluted in early April by a deal that will see convertible noteholders finish up with more than 60 per cent of the company's expanded capital base. ----------------------------------------------------------- He is the man who sold the ERG story in the dotcom boom and oversaw the convertible note raising that shareholders are now paying so dearly for. ----------------------------------------------------------- He also enjoyed a $1 million annual package for his efforts and last year had the good fortune of trading some of his equity in ERG for convertible notes. ----------------------------------------------------------- One analyst with a national broking firm said yesterday he doubted whether there would have been too many able to deal with ERG's many complex problems. ----------------------------------------------------------- "No one understands how its deals are structured, no one really knows what is in there, what are the commitments and can they fund them," he said. ----------------------------------------------------------- One senior analyst, who declined to be named as he gave up covering ERG in 2001 because it was too difficult to comprehend, said Mr Fogarty was probably the right man to steer it out of the mess. ----------------------------------------------------------- But he said the time was coming for the ERG board to take control and bring in a new managing director focused on maximising the value in the business. ----------------------------------------------------------- "Sooner or later they need to take stock of what assets they have got," he said. ----------------------------------------------------------- The widespread view is that the time for a reappraisal might come when the company's balance sheet is restructured in April. ----------------------------------------------------------- But one analyst said many tech companies had gone nowhere after entrepreneurial chief executives had left and most of Mr Fogarty's potential successors, such as Ian Allen and Tim Ungar, had left. ----------------------------------------------------------- "ERG is an entrepreneurial stock and you have to have a deal maker and risk taker at the front," the analyst said. ----------------------------------------------------------- "As long as they don't run out of money, he might be able to stick around for the next boom." and...... ----------------------------------------------------------- http://www.thewest.com.au/20030221/business/tw-business-home-sto88825.html ----------------------------------------------------------- 21/2/03---West Australian. ----------------------------------------------------------- ERG finally wins vital Sydney deal By Neale Prior ----------------------------------------------------------- ERG's volatile fortunes took yet another upturn yesterday when the ticketing group revealed it had won a $320 million contract with the NSW Government. ----------------------------------------------------------- Traders added about $30 million to the market value of the Balcatta-based public transport ticketing and smart-card company, despite concerns among analysts about the margins on its contracts and the value of technology and investments in its balance sheet. ----------------------------------------------------------- After two years of delays and legal fights, ERG and the NSW Government have finalised a deal that will involve ERG installing a $94 million upgrade of ticketing across the Sydney public transport network. ------------------------------------------------------------ It also has a $276 million, 10-year operating contract. ------------------------------------------------------------ ERG has secured the contract in the face of a damaging publicity and legal campaign waged by rival bidder Cubic Transportation Corporation and massive internal financial problems. ----------------------------------------------------------- The company's woes were cast aside yesterday as the stock jumped 3.5¢ to 16.5¢ on volume of 68.5 million shares, making it the most heavily traded stock on the market. ----------------------------------------------------------- It added about $34 million to the company's market capitalisation and more than $100 million on a fully diluted basis, taking into account a planned restructure that will see convertible noteholders gain equity control of the group. ----------------------------------------------------------- But it is a far cry from the company's market peak in 2001 when it enjoyed a market capitalisation exceeding $2.5 billion, institutional investor support and the operational and financial backing of US electronics group Motorola. ------------------------------------------------------------ ERG has been in a downward spiral since Motorola began selling out of ERG in early 2001, prompting concerns about the company's capacity to fund major transit ticketing contracts, and whether there was more to the sell-down than Motorola's own problems. ----------------------------------------------------------- Market watchers said the trading yesterday was dominated by broking firms servicing day traders. There was a lack of support from firms with strong institutional client bases, reflecting disquiet among institutions and analysts with the company and its management. ------------------------------------------------------------ ERG is to install the new Sydney system over the next three years, with plans for it to be fully operational in 2006. ------------------------------------------------------------ ERG chief executive Peter Fogarty said yesterday his group stood to gain extra payments for early completion of the system and had commercial opportunities from it gaining the rights to extend applications for transit smart cards. ------------------------------------------------------------ He said this could involve a range of transactions and functions that included parking, venue ticketing, security, road tolls, vending machines and retail transactions. ------------------------------------------------------------ The contract could be a watershed for the company. Sydney had gained attention in investor circles disproportionate to its size. ------------------------------------------------------------ "We are focusing on getting it all done. This is hopefully the start of a new, good new year," he said. ------------------------------------------------------------ But analysts remain wary amid concerns about the company previously being unable to make sustained profits despite wins in high-profile locations such as Singapore, Berlin, Hong Kong, San Francisco and Singapore. ------------------------------------------------------------ It has previously funded significant parts of its activities from its balance sheet using corporate debt and equity, but has signalled a move towards seeking more innovative project financing with the help of new shareholder Babcock & Brown. ------------------------------------------------------------ Mr Fogarty said yesterday ERG would prefer to get project financing but its final structure and whether it sat on the balance sheet would depend on the deals available. It had been in talks with financiers. ------------------------------------------------------------ He said the company had the internal financial resources to work on the Sydney job until long-term finance could be arranged. ------------------------------------------------------------ ERG is set to release its interim profit result early next month as well as an information memorandum explaining a proposed deal under which about 2.2 billion new shares will be issued to convertible noteholders on top of about 970 million shares already on issue. ------------------------------------------------------------ The restructure is a legacy of the unbridled optimism in the group in early 2000 when it was riding the tech-boom and sold the convertible notes at a hefty premium to an already-high equity price. ------------------------------------------------------------ But the notes have been badly out of the money in the company's slump over the past two years. ------------------------------------------------------------ W.A.N ------------------------------------------------------------ (Voluntary Disclosure:Position Short Term rating:Hold Long Term Rating:) ------------------------------------------------------------ [ Next Thread | Previous Thread | Next Message | Previous Message ] |
| Subject | Author | Date |
| gain extra payments for early completion of the system commercial opportunities | gaining the rights extend applications for transit smart cards. | Sunday, February 23, 03:45:51am |