Wellington, Feb 19 NZPA - Nuplex shares fell 16 percent to $1.55 today after the company said it is talking to its bankers after breaching a debt covenant.

The maker of resins released a profit downgrade this month and has been out of favour with investors since then.

Its share price was queried by share market operator NZX today. Nuplex said it is in discussions with its banks around loosening the senior debt cover ratio required under its banking facilities.

Debt cover is calculated by dividing a company's net bank debt by its ebitda.

"Unless the ratio is loosened, Nuplex will not comply with its covenant at December 31," the company said.

But Nuplex did not believe it was breaching continuous disclosure rules because it was in talks with the banks and had an expectation they would loosen the ratio to enable compliance at December 31. The talks were confidential.

Nuplex also speculated that the market might see similarities between itself and Fisher & Paykel Appliances.

Both companies carried significant levels of debt in overseas currencies and were manufacturing businesses affected by reduction in demand and the weak New Zealand dollar.

"The difference with Nuplex's position is that its earnings are tracking in accordance with the ebitda guidance given to the market on February 2, 2009. There is no further update on this position," Mr Storey said.

The company said February 2 that earning before interest, tax, depreciation and amortisation for the year to the end of December 2008 would be $42.5 million, below the guidance in November, which was in a range of $45m to $50m.

There was speculation from First NZ Capital that Nuplex might not be in compliance with senior debt cover ratio, Nuplex said.

The National Business Review this month reported that Nuplex was in danger of breaching its debt covenant, after cutting its earnings forecast due to soft market conditions.

The speculation from First NZ Capital that there may be a breach of bank facility covenant was accurate so the market was not misinformed, Nuplex said.

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