Fin Review take 2

Kidman v KBL

Talking of hostilities, the feud between neighbouring junior miners Kidman and KBL appears to have taken a turn for the terminal after a flurry of ASX announcements that have tested the indulgence of the market operator.

Twice in recent weeks ASX refused to publish proposed announcements by both sides of a contest that on Wednesday could see Kidman issue a loan default notice against KBL.

After an odd little deal in August with a member of the Kinghorn family, Kidman ended up owning 10 per cent of its fellow Condobolin gold prospector along with a $10 million loan note. Kidman people say the default notice will be issued after KBL failed to meet the disclosure obligations that support the $12.6 million now owed on the loan. Those notices give KBL 10 days to recover alignment with the loan covenants.

Kidman wants to see the term sheets of new funding arrangements that KBL is currently negotiating. KBL says it is not required to provide that level of data and has instead provided some intimate detail of the negotiations extant and opened access to an electronic dataroom. But the term sheets will not sit in that data pool. Kidman people say also that KBL risks triggering another default clause in their loan agreement if a meeting of convertible note owners on Wednesday morning goes as expected.

According to Kidman, their loan agreement means its approval is required for any change in the terms of any other debt instrument. The KBL noteholders are meeting to extend the term and raise the interest rate on their notes from 10 per cent to 12 per cent.

Given these are convertible notes, I expect the point of contention over default will be that they are quasiequity and thus not covered by the debt constraints in the loan agreement. Now, the way we see things, this stuff is all moot. In the end, we don’t see Kidman fully pursuing whatever rights it claims under the default notices. Because, in the end, we reckon this is all about forcing KBL to take over Kidman.

That, after all, is why Kidman has convened a special meeting to vote on a proposal to replace the KBL board with Kidman appointees.

Taken from Page 34, columns 4&5 of todays Fin Review - I'd hate be accused again of being unsubstantiated, no point in putting a link to the article, it's subscription only.

Rod