whats going to happen from here, page-35

Winemaker family comes a cropper ... again
Date: May 11 2012


Ian McIlwraith


DE BORTOLI Wines has more than $30 million of investment and superannuation money at risk in teetering base metals miner Kagara.

It is the second time that the successful Griffith-based family wine group has been caught with multimillion-dollar shareholdings in a public company placed into the hands of insolvency practitioners.

Ten years ago it was the $5 billion collapse of insurance group HIH, when De Bortoli Wines took a $14.5 million write-down on the value of its investment and later failed in a court bid to be counted with creditors for $9.2 million of shares.

This time around De Bortoli, and its superannuation fund subsidiary, held 56.8 million shares in Kagara when its shares were suspended the day after Anzac Day - the last 10 million of them bought between December and February.

Managing director Darren De Bortoli declined to speak to Insider about the investment.

De Bortoli's 2011 accounts show it spent more than $50 million on sharemarket investments in the year to June 30, and made a near $18 million trading profit. Its total investment portfolio grew from $37.5 million to $69.2 million. To put that in context, De Bortoli's wine sales were $165 million last financial year, and its net profit $16.6 million.

Kagara's total market worth when it was suspended, at 12¢ a share, was less than $100 million.

The chances of existing shareholders recouping much of their investment receded on Wednesday when administrators Taylor Woodings, appointed by Kagara's board on April 30, held the group's first creditors' meeting in Townsville.

Not only did Taylor Woodings partner Michael Ryan reveal that he planned to apply to the court for a deferral of up to six months before they convene another creditors' meeting - which is normally held in 21 days - he offered little comfort that Kagara might trade out of its difficulties.

"We will be looking into a range of options, including the sale of non-core assets and recapitalisation of the group, to realise value for the creditors and shareholders,'' he said in a press release.

Already, 216 of the company's employees have been sacked, with 95 kept on to steer the company through.

Kagara's most saleable asset is its 97.5 million shares in Mungana Goldmines, although that stake's worth has dropped $10 million to $34 million since Kagara appointed administrators. Mr Ryan said there were more than 830 creditors of Kagara, with claims totalling between $85 million and $95 million - the largest of them ANZ.

Shareholders caught in Kagara can at least take comfort from the fact that Taylor Woodings, unlike some administrators, seems to be sticking to the continuous disclosure requirements of the ASX.