Drug manufacturer Chemeq Ltd has been placed in administration after an appeal to overturn a court ruling ordering the company repay $60 million to its creditors failed.
Embattled animal drug manufacturer Chemeq Ltd has been placed in administration after an appeal to overturn a court ruling ordering the company repay $60 million to its creditors failed.
"Chemeq's appeal was dismissed this morning ... the company therefore is required to repay the $60 million to the bondholders immediately," a company spokesperson said.
"As a consequence of that, the directors have appointed Brian McMaster and David Winterbottom from KordaMentha as voluntary administrators of the company."
The company, which placed its Rockingham facility on care-and-maintenance earlier this year, had its entire production and maintenance staff walk out earlier this month, with maintenance covered by external contractors"on an as required basis".
Chemeq was unable to hire new staff under its undertakings with the bond holders.
The company had received a $75 million refinancing proposal from little-known St Georges Terrace banker International Finance Corporation of Australasia Pty Ltd, earlier this year.
Unfortunately for Chemeq, the administrative costs of $215,000 for the proposal proved too much for the Supreme Court, which ruled it was more important that the orders governing its activities were maintained until the appeal washanded down.
The company's legal woes were caused by US bonds trader Stark Trading and Harmony Capital Partners, which had issued convertible bonds to the company worth $50 million and $10 million respectively.
One condition of the contract was that Chemeq achieve total gross revenue of at least $4 million for the year ended 30 June 2006.
The company's income statement for the 2005-06 financial year shows a revenue of $4.1 million, however the company's independent audit report identified uncertainty about the validity of a $1.5 million contract with Chemeq's South African distributor Inviro.
Inviro refused to pay the company, saying the terms of a sales agreement between the two had been altered. While Chemeq was pursuing legal action against Inviro, it argued in the Supreme Court it could book the $1.5 million as revenue since product delivery was made and accepted by Inviro at the time.
Stark and Harmony disagreed, seeking immediate repayment of the bonds on the grounds Chemeq had violated its revenue covenant.
Chemeq shares closed at 8.3 cents yesterday before going into a trading halt ahead of today's announcement - they have now been suspended.
