"September 30"THE WEST AUSTRALIAN Monday, 29 April 2013 09:13...

"September 30"


THE WEST AUSTRALIAN
Monday, 29 April 2013 09:13

Kagara administrators have asked for another five months to resuscitate the stricken base metals group in the face of creditor claims of more than $90 million and a potential insolvent trading inquiry.

While pushing for more time for asset sales and for long-time director Joe Treacy to put together a rescue deal, the administrators have told creditors they could also carry out investigations into other potential recovery actions.

In a letter sent to creditors promoting a potential restructure, Mr Treacy said they would receive cash plus shares in return for their debt and be able to participate in the "predicted upswing" in metal prices.

At the centre of the revived group would be its undeveloped Admiral Bay zinc and lead project, about 200km south of Broome, and a stake in its sharemarket-listed precious metals spin-off Mungana Goldmines.

The mooted restructure could see creditors of the West Perth-based Kagara parent entity get a return of 50¢ for every dollar of debt, yet creditors of the group's troubled Queensland base metals mining and exploration operations could reveive as little as 2.4¢ in the dollar.

Kagara directors called in administrators in April last year after financier ANZ withdrew support and snatched the lion's share of the proceeds from the $68 milllion sale of its Lounge Lizard nickel project.

The collapse came after months of financial strain at the West Perth-based group as its ambitious growth plans were shredded by falling metal prices and project woes. Kagara wrote to trade creditors in December, 2011, to apologise for delays bill payments and to allay fears that "we will not honour our commitments".

An administrators' report said between $2.4 million and $58.2 million could potentially be recovered from insolvent trading actions, depending on whether the company was ultimately found to be insolvent in early December or when ANZ pulled support in April.

But the administrators warned that directors could have a defence to any insolvent trading actions with arguments that they expected cash from asset sales, were trying to raise new capital and had ANZ's support.

The report also reveals that Kagara made a $388,000 loan to former CEO Geoff Day in November, 2011 so he could buy a new home in Perth. The loan was made after Mr Day revealed he intended to sell shares on the market for a deposit and he was asked not to sell stock because it could have generated "adverse publicity", according to administrators.

They said no payment had been made on the loan despite requests he repay it in full, together with interest. "Mr Day has indicated he wants to set off the amount against his redundancy entitlement," the administrators said.

Creditors will meet in Perth, Brisbane, Cairns, Townsville and Sydney on 6 May.

Administrators recommend creditors vote in favour of what they describe as a holding deed of company arrangement, giving Mr Treacy until September 30 to come up with a plan that would underpin a more permanent deed.

They said this left the way open for creditors to later put the company into liquidation, while allowing assets sales to be carried out in the meantime without perceptions of a fire sale.