Paperlinx has suspended trading in its shares on the ASX while it investigates a ‘likely breach of its European banking covenant’. The paper giant’s share market ‘voluntary suspension’ begun on March 30,and will last for at least nine days until April 8. “The voluntary suspension in necessary as a subsidiary of the company is still in discussions with one of its European financiers in relation to a likely breach of a banking covenant,” Paperlinx says in a statement.
“Accordingly, the company is not yet in a position to make an announcement regarding this matter.” The company says it was ‘appropriate to enter into voluntary suspension so it can manage its continuous disclosure obligations’ to shareholders. The share price for Paperlinx remains at 1.7c, 0.2c higher than the all-time low it reached after announcing a $90.8m loss in the first half of FY15 on a 12 per cent revenue slump. The troubled paper giant has previously revealed its plans to sell its European arm, which now seems to be more complicated, and raises the possibility of a fire sale that will further hurt the bottom line. Europe has been experiencing cash flow pressures for a while now with sales dropping 15 per cent to $884m in the HY, while pre-tax losses shot up 94 per cent to $15.7m, and EBIT losses were 14 per cent worse at $21.35m. Major British paper manufacturer GF Smith cancelled its supply to Paperlinx on Thursday over concerns the merchant’s instability could leave its customers hanging. “We have made this tough decision to ensure that the end users and specifiers of our products are assured continuity of supply,” managing director John Haslam says. “Anyone who has placed an order for GF Smith products through Paperlinx within the past two days should contact GF Smith directly immediately.” Paperlinx has been light on providing information in recent months following the shock sacking of its CEO Andrew Price, where the company refused to front the media. Price was replaced with Andy Preece, who was the executive general manager, Australia, New Zealand and Asia at Spicers, a subsidiary of Paperlinx, within days.
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