Gale meets first creditor payment

17/02/2004 - 21:00

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SWIFTEL chief executive Chris Gale looked like a man with a clear conscience as he mingled with the corporate crowd at the weekend’s Leeuwin Concert.

SWIFTEL chief executive Chris Gale looked like a man with a clear conscience as he mingled with the corporate crowd at the weekend’s Leeuwin Concert.

During the week prior to WA’s bluest of blue chip events, Mr Gale had met the first of his obligations to creditors of his private business interests, paying $100,000 as the first stage of a deal he signed in November.

Paid last week to Gary Anderson, the administrator of a deed of company arrangement agreed to by the creditors of Mr Gale’s failed company Wingside Nominees Pty Ltd, the $100,000 is to be followed by a second instalment of $250,000 in 12 months’ time.

But that still leaves creditors about $850,000 out of pocket for the services they provided to Wingside, largely cabling and infrastructure work to establish broadband networks – including Swiftel’s CBD network.

Mr Gale was cashed up after selling $960,000 of Swiftel shares and options late last year, around half his stake in the fast-growing listed company he runs.

Last month he told WA Business News he was the biggest loser from the collapse of Wingside, which was put into the hands of the administrator in August after its operations were sold to national listed IT infrastructure player KLM Group – run by Mr Gale’s former business partners, Peter and Greg Jinks.

Mr Gale said Wingside owed him $500,000, a figure he had waived for the purposes of the deed. He said he was also personally paying off a debt to the Australian Taxation Office of about $250,000, and had paid out secured creditor StateWest Credit Society, a figure understood to have been about $100,000.

But, when previously interviewed by WA Business News, Mr Gale neglected to mention that a company of which he was a sole director, Five Star Pty Ltd, owed almost $900,000 to Wingside when it collapsed, a debt accumulated over three years.

Mr Anderson’s September 10 administrator’s report, obtained by WA Business News last week, fails to shed any light on what Five Star’s $892,152 debt is for, other than to highlight the amounts of money that flowed from Wingside as loans.

Five Star was the biggest borrower over four years, according to accounts from Mr Anderson, who said: “… it could be strongly argued that the company appeared to have been insolvent during the past four years”.

In a reply to questions this week from WA Business News on the Five Star debt, Mr Gale denied the company had traded while insolvent.

Mr Gale also said he had received legal advice that his “decision not to prove a claim against Wingside Nominees, combined with his personal commitment to pay an outstanding amount of approximately $300,000 plus to the Australian Taxation Office, cancels out the Five Star debt to Wingside Nominees”.

Mr Anderson’s report last year states that he had not verified the $522,414 in investment funds Mr Gale claimed he was owed by Wingside.

The report says Mr Gale had advised Mr Anderson that Five Star’s only assets were shares and options in KLM Group, paid in consideration for the sale of Wingside’s WA business operations.

Mr Gale said this transaction was an “arm’s length transaction”.

“Five Star holds the shares – there is absolutely nothing sinister about this,” he said.

Those shares were valued by KLM at about $170,000 at the time of the transaction in June, although Mr Anderson valued them at only $85,000 in his report, on the advice of Mr Gale.

The value of this shareholding (250,000 ordinary shares and 500,000 December 2005 options) was limited by restrictions placed on it, though the shares alone were trading at 30 cents each this week.

At the time of the deal KLM reported to the stock market that the equity consideration would “not vest absolutely with the vendor unless the Western Australian business achieves a revenue for the 12 months ended 30 June 2004 of at least $3.5 million with a minimum 20 per cent gross operating margin”.

While KLM co-managing director Peter Jinks confirmed the arrangement, he said that if Mr Gale introduced business to KLM from outside the WA market, this would be taken into consideration when the escrow period was over.

He said some of this work could come through Swiftel, though it could simply be a successful introduction without any direct link to Mr Gale’s current employer.

At the time of the arrangement, Mr Jinks said it was expected that the most likely location for any work introduced by Mr Gale would be Sydney, where the Swiftel chief is believed to spend most of his time.

However, Mr Jinks said it was unlikely Mr Gale would reach the $3.5 million target, which would mean the share issue would be null and void.

When asked whether he was in a position to direct business to KLM, Mr Gale said KLM had an annual maintenance agreement with Swiftel worth $10,000 a year.

 

 

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