Struggling engineering contractor VDM Group has unveiled a recapitalisation proposal that involves some of its creditors being paid in shares, and warned the company may be placed in administration if the package does not proceed.
VDM also released its overdue annual accounts today, revealing a net loss of $84.4 million for the year to June 2013 on the back of shrinking revenue, squeezed margins and $19.5 million of impairments.
The West Perth-based company is planning a rights issue pitched at just 1 cent per share, to raise a minimum of $5 million.
It has also put forward a proposal to creditors who are owned money related to VDM’s work at BHP Billiton’s Jimblebar iron ore project.
Jimblebar is believed to the project that VDM was removed from in August, after falling into a dispute over the terms of its contract.
Under the proposal, creditors will be paid 20 per cent of their debt upon execution of relevant documents.
A further 35 per cent will converted to shares at 1 cent per share, and the balance will be repaid no later than July 1 2014.
VDM did not disclose the extent of this debt, but its annual report states that the company has contingent revenue in excess of $12 million, subject to settlement of disputes with clients.
Pending completion of its rights issue and creditor proposal, the company has agreed to a $4 million loan from major shareholder H&H Holdings, a company associated with its new managing director Dongyi Hua.
If shareholders approve the restructuring, it will result in H&H securing control of the company’s board, with Mr Hua planning to become executive chairman and H&H gaining the right to appoint a third director.
Chairman Michael Perrott will become deputy chairman and current directors Barry Nazer and Richard Mickle will resign.
Writing in the annual report, Dr Hua said the group was planning to sell parts of its consulting business, via management buy-outs.
Dr Hua said he wanted to bring new people and new business methods to VDM, to help it return to profitability.
Future opportunities identified by the company include establishing a procurement hub in Shanghai and moving into mining.
The company said growth opportunities would only be targeted after its restructuring was completed, in three to six months.
