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Wolseley Plc, which retained Stock Building Supply's construction loans business in May when it sold 51% of the rest of Stock, reported today that the construction loans group recorded a loss of 23 million British pounds ($37.9 million at current exchange rates) in the 11-month period ended June 30.
The British LBM giant also reported that it recorded a loss of 10 million pounds ($16.5 million) after tax but before exceptional items on its 49% holding in Stock from May 6--the day after selling its 51% stake to The Gores Group of Los Angeles--to June 30, the last day of its latest interim reporting period.
The latest loss in the construction loans business was more than triple what it incurred in the year-earlier period. About a third of the latest trading loss was recouped through roughly 8 million pounds ($13.2 million) in interest income.
Wolseley said the receivables loan balance after provisions for Stock's construction loans was roughly 175 million pounds ($288.6 million). That balance "is currently being assessed for fair value in light of the recent Stock transaction," Wolseley said. If it does choose to report an impairment in that asset, it plans to make an exceptional provision when reporting its results for the full fiscal year, which ends July 31.
Stock, the No. 2 company on the 2009 ProSales 100, had been providing 10% of Wolseley's global revenues. But financial setbacks at the Raleigh, N.C.-based dealer started dragging down Wolseley's revenues and profits. When the recession went global, Wolseley was in even more dire straits, so it began seeking a joint-venture partner for Stock. It found one in the Gores Group, which as a precondition for its investment required Stock to enter Chapter 11 bankruptcy protection. Wolseley helped provided financing during that time in Chapter 11, which ended June 15.
"As per the terms of the original transaction, and following completion of the recapitalization, Gores has invested $75 million in Stock and put in place a $150 million undrawn bank credit facility," Wolseley said. "In addition, the $100 million [debtor in possession] facility provided by Wolseley, which remained undrawn in the period, was canceled. Wolseley has no remaining finance commitments in relation to the joint venture."
While Wolseley has cut its debt 14-fold since April and thus no longer is in danger of violating lender covenants, its financial situation remains weak; it announced today it has decided to sell its operations in Belgium, Slovakia and the Czech Republic. Meanwhile, the company's management structure has been shaken by the departure of former CEO Chip Hornsby on June 30. Hornsby's successor, Ian Meakins, arrived July 13.