Poor results hangover forces Vestas to defer debt test

DENMARK: Fears over the impact of recent poor financial results on Vestas' ability to meet its debt repayments have prompted the turbine manufacturer to delay the testing of its banking facilities.

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Vestas has agreed with its lenders to defer the half-year 2012 testing of the financial covenants contained in its banking facilities. In addition, Vestas' lenders have also agreed that the firm can continue to draw down funds from its credit facilities during the deferral period.

The firm was unavailable for comment on when the test will be deferred, but stressed today in an announcement of its Q2 results that the concern over possible banking covenant breaches was a "temporary issue".

Vestas posted improved results for Q2, with revenue up 46% from Q1 to €1.6 billion and pre-tax profit up to €40 million, compared to a €204 million loss in Q1.

However, Q1's poor results combined with a poor second half of 2011 continue to have a negative impact on the company's cash flow, which has grown to minus €338 million from minus €295 million in Q1.

"Vestas has experienced a strong improvement in earnings and activity level in the second quarter of 2012 compared to the first quarter of the year," said today's announcement by the company.

"Despite this, financial covenants testing is affected by the disappointing results realised by Vestas in the second half year of 2011 and the first quarter of 2012, which mainly related to the cost overruns in relation to the introduction of new technology. Vestas has therefore agreed with its lenders to defer the half-year 2012 testing of the financial covenants contained in Vestas' banking facilities and the lenders have allowed drawings, which in the opinion of Vestas are sufficient for the continued operation of Vestas on usual terms since the company expects to test on normal terms in the future.

"Vestas considers this to be a temporary issue and in the light of the company's positive results in the second quarter of 2012 combined with the large backlog of firm and unconditional orders, Vestas expects to meet the financial covenants contained in its current banking facilities in the near-term future."

The statement follows reports at the start of July that Vestas had been told by its banks to work out a debt restructuring plan.

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