SHAREHOLDER REQUEST FOR GM [S.249D]It was established at the AGM...

SHAREHOLDER REQUEST FOR GM [S.249D]
It was established at the AGM that the CEO had failed to advise the independent directors, Callanan & Pitliangas, that a group of shareholders [>5%] had lodged a request for a GM under S.249D(1) of the Act in October 2012.

Anticipating that the shareholder's GM request with its Explanatory Memorandum might conveniently go missing in the mail, the request was sent by registered mail with a receipt. That receipt was signed by the CEO John Trimble in late October 2012. Thank goodness we have that registered mail receipt as the CEO now has no recollection of having received the GM request.

LOAN FACILITY AGREEMENT
Another important document not read by the independent directors is the "Loan Facility Agreement" dated 13 June 2003 between Metropolis City Promotions Pty Ltd & The Daily Planet Ltd [now PPN].

It was established at the AGM that the current "Facility Limit" is still $2,110,000 as specified in Clause 1.1 of the original agreement. However, the loan balance as at 31/12/2013 was $2,617,390. I believe the intent of this agreement was that the interest would be paid on time and the loan balance should never exceed $2,110,000. I didn't appreciate the answer from one of the advisers that the half million difference is accrued interest and nothing to do with the Facility Limit. Nor did I appreciate the answer from the CEO that there never was a debt. The auditor says that there is a debt and the amount is $2,617,390 which does in fact exceed the Facility Limit.

Clause 14 of the agreement defines a number of default events. If any of these events should occur then the amount owing will, at the Lender's option, become immediately due an payable.

At the AGM I pointed out that default events may have occurred, an example being the Clover Dale P/L insolvency case. [Mission Development Pty Ltd v Clover Dale Pty Ltd [2011] VSC 148 (14 April 2011)]

Clover Dale Pty Ltd is one of the Guarantors to the Loan Facility Agreement with MCP Investments Pty Ltd, Daily Planet Australia Pty Ltd and Cameron Lane Pty Ltd

SECURITY FOR DEBT
We have been told in the annual reports for 10 years that the loan is secured by a fixed and floating charge over the assets of Metropolis City Promotions Pty Ltd, mortgages over real property and guarantees from Daily Planet Australia Pty Ltd, Cameron lane Pty Ltd and Mr John Trimble.

When a question about security was asked, the accountants, auditors & consultants were unanimous in saying that adequate security was in fact held. Without an audited statement of the income and assets from the Guarantors, how can they be so sure adequate security over tangible assets is held.

The same thinking applies to the rental and valuation of PPN's property in Horne St Elsternwick [Daily Planet brothel]. Trimble sold us this building in 2003 for $5,750,000 based on a notional rent multiplied by a capitalisation factor. When the building was put up for sale in 2004 through Knight Frank agents, they provided information about the brothel business and expected rent. On my calculations, the value based on the Knight Frank figures comes close to the 2003 valuation.

The Horne St rental property is currently valued at $3,950,000 based on annual rent multiplied by a capitalisation factor. Without an audited profit & loss statement for the Daily Planet brothel, how can PPN shareholders be sure that we are receiving fair market rent and in turn how can we be sure that the current valuation based on that rent is correct?

Somebody has got it wrong. Perhaps the valuer in 2003 [Walstab] and Knight Frank in 2004 are correct and we are currently being shortchanged on the rent.

Don't let me get started on the amendment to Appendix A in the constitution removing the provision whereby rental from the Daily Planet was to increase according to a formula as Trimble converted his Class B shares to ordinary. We really got sucked in on that when Horne St was put up for sale, the constitution changed on the basis there would be no rental after the sale and then Horne St was withdrawn from sale.

All credit to the sole remaining independent director, John Callanan, who has given an undertaking to look at the Loan Facility Agreement and other things. I am confident that John Callanan, a former mayor of St Kilda, will use all reasonable endeavours to satisfy himself that PPN is run in accordance with the law and the highest standards of propriety.

With the spill motion and resignation of Mr Pitliangas, PPN has the opportunity to build an effective board to support Mr Callanan. Should PPN recruit a majority of non-executive directors with an appropriate mix of skills and experience, and who value the rights of minority shareholders, the days of the tail wagging the dog may be over and the company can move forward.