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News of finance deal, US prospects give ERG a lift

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    News of finance deal, US prospects give ERG a lift
    By Colin Kruger
    October 5 2002

    ERG lifted its stock price from 12-month lows this week with new financing and an expanded partnership with Northrop Grumman Information Technology to pursue transit projects in the US.

    The two companies are bidding on a contract for the Washington Metropolitan Area Transit Authority and have "agreed to expand the relationship to other transport tenders", an ERG spokesman said.

    "Northrop Grumman IT brings an excellent reputation for integrity, strength and know-how in working on major complex government projects," ERG chief executive Peter Fogarty said.

    Northrop Grumman IT is a subsidiary of US defence contractor Northrop Grumman, which Mr Fogarty has previously mentioned as an ideal partner for the troubled smart card vendor.

    ERG announced a full-year $243.9 million loss last month and saw its stock price plunge.

    The shares bottomed at a 12-month low of 16c last week and closed at 18c yesterday.

    The company's cause wasn't helped with the release of Monday's annual report. It contained a directors' statement admitting "there is a significant uncertainty as to whether the parent company ... will continue as a going concern".

    A market analyst who wished to remain anonymous agreed with the verdict and said most brokers had stopped following the stock.

    "The share price is very much in the hands of day traders at the moment," he said.

    The shares got a reprieve with the announcement that ERG had secured a $30 million loan agreement with investment firm Babc#ck & Brown.

    The firm will advise ERG on future funding and its Australian director will join the ERG board.

    ERG is the preferred tenderer for the troubled $100 million NSW integrated ticketing program. The company was working with the Government to finalise a deal, ERG said.

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