LISTED agricultural property investment company, The Ark Fund, has extended its deadline for private managed investment scheme player Rewards Group to pay rent owed on its widespread portfolio, understood to be 30 properties around Australia.
LISTED agricultural property investment company, The Ark Fund, has extended its deadline for private managed investment scheme player Rewards Group to pay rent owed on its widespread portfolio, understood to be 30 properties around Australia.
It is not known how much rent is in arrears, but last financial year Rewards paid $6.4 million as Ark Fund’s sole tenant.
Ark Fund had previously given Rewards until February 15 to pay the rent but late last week said it would extend the deadline to March 15.
Rewards and Ark Fund have substantial business connections from equity holdings, debt guarantees and a related-party management contract.
The pair was discussing a merger but that was dropped in favour of a $28 million IPO for Rewards. The listing has also been abandoned in favour of a private equity raising of as much as $45 million through which Rewards intends to clear bank debt of almost $20 million owed to National Australia Bank.
The equity raising is being lead by Argonaut Securities, which is undertaking a road show through South-East Asia this week.
Argonaut managing director Eddie Rigg said that, in the current environment it was decided an IPO was not the best path for the company, which needed more patient capital.
“We would have got it away but we were not raising enough money,” he said.
“We had to raise more money and get the banks completely out of the story.
“You can’t have a financial partner who wants to get out at the wrong time.
Joint managing director Andrew Radomiljac confirmed the company had been working since late last year with its key financier National Australia Bank to clear the debt.
“We have a great relationship with our bankers,” Mr Radomiljac said.
“Our debt position is very low but this space is not where they want to be, through no fault of our own. We have discussed with NAB a plan to get down to zero and they have been very supportive of that.”
Mr Radomiljac said the merger with Ark Fund was just one scenario the company had explored. He added that Ark Fund were also supportive of the Rewards strategy.
“That is agreed and locked in with Ark itself, Ark is very supportive of the process,” he said.
Rewards owns around 13 per cent of Ark Fund. The stake cost more than $3 million but would be worth about $1.3 million based the company’s last close at 41 cents per share before trading was suspended on February 15.
Ark Fund’s next biggest shareholders are Australian Executor Trustees with more than 12 per cent and Wyllie Group at almost 10 per cent.
Rewards has also provided a guarantee for $9 million of a $33 million debt owed by Ark Fund to NAB. Ark Fund has breached the loan to value covenants of that loan, which means Rewards’ guarantee is now available to the bank.
Last year, Ark Fund also paid Rewards for personnel and other administrative services.
Furthermore, Ark Fund’s annual report shows that its managing director, John Kenny, is a director and owns one third of Ark Capital, a company controlled and operated jointly with Andrew Radomiljac and Craig Anderson, who are both joint managing directors of Rewards.
Ark Capital performs the role of Ark Fund’s CEO and is contracted to be paid a fee equal to 7.5 per cent of the earnings before interest and income tax of Ark Fund, which amounted to around $400,000 last financial year.
