The dispute between embattled animal pharmaceutical products manufacturer Chemeq Ltd and US bonds trader Stark Trading will be adjourned to November 29 to permit a Supreme Court hearing.
The dispute between embattled animal pharmaceutical products manufacturer Chemeq Ltd and US bonds trader Stark Trading will be adjourned to November 29 to permit a Supreme Court hearing.
Stark had alleged that, by failing to achieve total gross revenue of at least $4 million for the year ended 30 June 2006, Chemeq had violated its revenue covenant with the group.
As a result, Stark had sought repayment within 10 business days of its convertible bonds, which have a face value of $50 million, by November 5.
The claim was prompted by a dispute over a $1.5 million sales contract with Chemeq's South African distributor Inviro, which has refused to meet the payment terms of the contract. Chemeq has stated that the $1.5 million could be booked under accounting regulations since delivery was made and acepted by the customer.
Chemeq is currently pursuing legal action against Inviro in the South African courts. In the meantime, the company has implemented a direct distribution model in South Africa to serve its current and future customers.
The full text of a company announcement is pasted below
Chemeq Ltd and Stark Trading and its affiliates have agreed their dispute will be adjourned to on or about 29 November 2006 for determination by the Supreme Court.
On that date, it is expected that the Supreme Court will determine whether Stark will be formally injuncted from relying on the Notices of Redemption pending the trial of Chemeq's action seeking a declaration that it has met the final milestone covenant.
The parties have agreed to maintain the status quo until 30 November 2006 to allow that hearing to take place.
The ultimate trial date will be dependent on the outcome of the injunction hearing, but is likely to be sometime in the new year at the earliest.
Chemeq is strongly of the view that it has met the final milestone covenant.
The dispute with the bondholders centres on the terms of a sale contract between Chemeq and Inviro and whether this sale can be included as revenue under a convertible bond milestone covenant.
Inviro has refused to meet the payment terms of the sale contract between Chemeq and Inviro in the amount of $1,446,524. Chemeq is currently taking action against Inviro to recover the amounts due and payable under the contract in South Africa.
Chemeq continues to directly engage with major poultry producers in South Africa, being the most significant current market for Chemeq's products. The trial program with the major producers is ongoing and Chemeq maintains active dialogue with these producers to incorporate the product into their production processes.
Chemeq has a distribution agreement in South Africa with Inviro. Under this agreement, Chemeq retained the right to directly distribute and market product to the major South African poultry producers. Inviro has sought to terminate its distribution agreement with Chemeq.
Chemeq is of the view that termination of the distribution agreement with Inviro will have no material impact on Chemeq's operations.
Chemeq has now implemented a direct distribution model in South Africa and believes that this represents the best way to service its current and future customers in South Africa.
