LOS ANGELES, CA -- (Marketwired) -- Oct 21, 2015 -- I am an owner of both the common equity and hybrid securities in PaperlinX (the "Company") and served as a non-executive director from August 2011 to November 2012.
I am deeply concerned for the future of PaperlinX given its corporate financial performance and governance over the last three years.
Below is a brief summary of the Company's recent results and performance:
- Cumulative net losses from Jan 2013 to June 2015 of nearly $500mm AUD.
- Approximately $100mm AUD spent on a strategic review and restructurings with minimal return.
- Majority of the European entities and the UK business file for voluntary administration in 2015.
- Canadian business sold for approximately $33mm AUD below stated book value.
- PaperlinX common equity share price has declined by approximately fifty percent from November 2012 through September 2015.
- Cumulative Board fees paid to non-executive directors Kaye and Barker since their appointments of approximately $1.2mm AUD.
- Did not disclose related party contract with substantial shareholder Communications Power Incorporated in the 2014 PaperlinX financial report. Payments to this entity total over $400,000 AUD per year in 2014 and 2015.
- Former CEO terminated prior to contract end date.
- Barker replaced as Board chair less than a year after his initial appointment.
Further, Note 40 of the PaperlinX 2015 financial report (the "Report") indicates: "Non-current loan and borrowings comprise a loan (the "Loan") from a wholly-owned subsidiary of the Consolidated Entity with a maturity date greater than 12 months after balance date. The Directors of the Company intend to renegotiate the terms of this loan on or before the maturity date and have a reasonable expectation that the loan will not be repaid in the foreseeable future". This account line item designated non-current loans and borrowings is $251mm AUD.
I have submitted to KPMG, the PaperlinX auditor and Ms. Penny Strgalianos, the lead audit partner, questions under Section 250 PA of the Corporations Act of 2001 in advance of the PaperlinX AGM scheduled for Friday October 23, 2015. Detailed below are excerpts of those questions:
1. Please detail the Loan amount, the maturity date, interest rate and all other relevant terms related to the Loan. Provide the analysis that supports the carrying value of the Loan and the going concern determination in the Report. Detail the facts and analysis that support the Directors' claims regarding the proposed renegotiation of the Loan and/or the expectation that the Loan will not be repaid.
2. Has the RE, its auditors (E&Y) and the PaperlinX SPS LLC Director(s) been provided with sufficient information with respect to the Loan so that each of them can satisfy their fiduciary duties and, where applicable, their disclosure obligations to the ASX, if applicable?
3. Please describe the key terms of the agreement with Communications Power Incorporated, including, but not limited to, the start date, the end date, the fee and any expense reimbursement provision. Please indicate the total amounts incurred by the Company since inception of the agreement through August 31, 2015.
I encourage all common shareholders to seek answers to these questions, the full text of which should be made available to you at the Company's AGM on Friday October 23, 2015.
I also encourage all hybrid holders to seek confirmation that The Trust Company Limited, the responsible entity of the SPS Trust, and its representative Mr. Rupert Smoker, has and is pursuing all options and taking all actions necessary to protect the value of the hybrids.
In summary, over the last three years, the Company has experienced substantial financial losses, the placement into voluntary administration of a sizeable portion of its revenue base, a significant decline in shareholder value and changing leadership. During this time period, together Kaye and Barker have collected over $1.2mm AUD in Board fees and the 2015 financial report describes a previously undisclosed contract with one particular substantial shareholder for hundreds of thousands of dollars. All stakeholders in PaperlinX should seek more comprehensive disclosures and explanations about these matters, and others, at the Company's AGM.
Simply, in the memorable words of the late US President, Ronald Reagan, all PaperlinX stakeholders may "TRUST", but more importantly, must "VERIFY", all communications and disclosures regarding the Company.
Concerned PaperlinX Stakeholder
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