If the Prime appointed destra board allows the company to become technically insolvent and they place the company into administration, or if the bank forecloses and a receiver is appointed, Prime lose control of the process.
Not only will they lose their investment, and most likely their $2 million loan as the bank will have secured its own preferred creditor position, but there is no guarantee they'll pick up those portions of the business they wish to acquire...they'll have thrown the baby out with the bathwater! I wonder what Prime shareholders would make of that announcement so soon after their board confidently sunk millions into destra?
In this scenario the administrators would wish to conduct an orderly sale of assets unlike the firesale approach of the destra board which was an entirely self-serving exercise designed more for Prime's benefit than destra's and there ARE parties who'd be interested...I have first hand knowledge of one ASX listed entity who is already watching from the sidelines.
Any scenario is possible but Prime has to tread very carefully to avoid a serious financial and credibility SNAFU and end up with even more egg on their face than they already have.
Bear in mind that if destra was a basket case there would have been no $2m loan from Prime who now control the company. Why throw good money after bad?
As Succession has pointed out the write-downs have taken place..very aggressively..and selected assets have been disposed of. With anything but an incompetent board or malicious intent destra should now be on its way back.
The bottom line is neither the bank nor Prime would benefit from destra's insolvency..the cost to both would be too high.
My view? By December the destra board will have a good idea of retail sell through and the likely volume of returns which will be netted off against the amounts owed to destra. This will then be communicated to Prime who will then decide on a suitable bid strategy and price.
Plenty of time for a recovery in the share price!
J
DES Price at posting:
1.4¢ Sentiment: Buy Disclosure: Held
