From today's AFR, would love to know why SGH could not reach an...

From today's AFR, would love to know why SGH could not reach an agreement with Harbour regarding funding.

I also think that SGH (and it's shareholders) could not handle a high profile loss . Their reputation has taken a battering over the last 24 months (as has their shareprice) and they need some good PR and some high profile case wins. (I do not own SGH).

Good to see IMF protecting it's home turf against overseas based funders.

Article:

IMF optimistic on UGL class action proposal
By Jenny Wiggins


October 02, 2016, 11:45pm

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New UGL CEO Ross Taylor needs to prove to investors he can sort out the Ichthys contracts.
A proposed class action against UGL has "good prospects of success", litigation funder IMF Bentham said, as investors cautiously await the outcome of Slater and Gordon's investigation into alleged disclosure breaches by the contractor.

Slater and Gordon wants to bring legal action against UGL over allegations it delayed informing investors about cost blowouts on a power plant contract for INPEX's Ichthys gas project in late 2014.

The law firm previously had talks with the UK's biggest litigation funder, Harbour, about bringing action but was unable to reach an agreement. It has subsequently teamed up with IMF.

"We believe that the claim is strong, we wouldn't be funding it if we didn't believe it was strong and had good prospects of success," Ewen McNee, investment manager at IMF Bentham, told The Australian Financial Review.

Tim Finney, principal lawyer at Slater and Gordon, said the firm had "carefully prepared" the proposed claim.


"We expect strong support from the investment community in bringing the claim," Mr Finney said. Institutional investor Clime Capital has agreed to act as the representative applicant if sufficient investors sign up and the class action goes ahead.

Retail and institutional investors who bought UGL shares from August 8, 2014, to November 5, 2014, have been asked to register their interest in the class action, which will allege that UGL was aware as early as August that its power plant project was facing cost blowouts.

Cost concerns
UGL's joint venture partner, CH2M Hill, had revealed in a filing to the US's Securities and Exchange Commission in August 2014 that it was worried about rising costs and the potential for liquidated damages on the power plant contract.

UGL did not reveal the cost blowouts until November 6, when its stock slumped almost 15 per cent.

John Abernethy, chief investment officer at Clime, said the fund, which bought shares before November 5, had lost $500,000 following the stock slump. The fund had "a duty" to pursue the class action because it was the custodian of peoples' money and there had been "prima facie" breach of disclosure, Mr Abernethy said.

IMF needs a minimum estimated claim size of $30 million to proceed with funding class actions.

Simon Mawhinney, managing director of Allan Gray, UGL's biggest investor, said he was unsure whether the class action would "gain traction".

"As a near 20 per cent holder throughout this period, I sense that the chances are low but I've been surprised by the settlement of class actions in the past so I see no reason why this couldn't surprise me," Mr Mahwinney said.

UGL declined to comment on the class action proposal.

The November 6 statement came as UGL, which was then run by former chief executive Richard Leupen, confirmed it had completed the sale of its DTZ property arm to private equity group TPG for $1.2 billion.

Impact on negotiations
Some analysts said at the time that if UGL had revealed the power plant problems earlier, it could have hurt the sale negotiations, making it look like a forced seller of DTZ.

UGL did not write down the value of the power plant contract until February 2015, when new CEO Ross Taylor said the company would take $175 million in provisions.

In June 2016 UGL said it was considering taking an additional $200 million of write-downs on both the power plant and the company's other contract with Ichthys, a $740 million structural, mechanical and piping contract in a joint venture with Canadian-owned engineering group Kentz.

Analysts continue to be concerned about the outlook for both Ichthys contracts, neither of which are complete.

Morgan Stanley warned in August that UGL has "little capacity" to absorb unexpected costs or underperformance without "exhausting available liquidity."

"If UGL can transition through its Ichthys challenges without additional cost we see significant underlying value in the shares," the bank said in a research note. "The overhang of Ichthys however cannot be ignored and clearly has the potential to more than outweigh any improvement in the underlying core business."

UGL's shares closed at $2.14 on Friday, up 8 per cent over the past 12 months.