Yep, Altor's return is guaranteed. It it all goes tits up the funding provided and the interest payable is secured against the loan book and the R&D.
i) The Company has a $7.5m wholesale facility with a private investment firm, Altor Capital Management Pty Ltd ("Altor"). The facility has an interest rate of 11.5% and a maturity date of 30 March 2023. The facility is secured over Propell's Loans and Advances.
ii) The Company owes $0.534m on a fully drawn working capital facility from Altor AltFi Income Fund. This loan has an interest rate of 15% and is secured over current and future amounts to be received from the Australian Tax Office for Development Tax Incentives for approved R&D activities
It has always been positioned that that he was just a lowly employee of Altor. When they gave options to Altor for a cut in the interest rate they said: “is not a director of, nor does he not own or control Altor Group entities including the lender”
The Australian are saying: "Mr Harrison and Angela Harrison are sole directors and shareholders of Plutus Capital, which owns half of Altor."
It may technically be the truth that he does "not own" but clearly investors didn't get the whole story.
So when they cooked this up, it seems the idea was investors would fund the admin (including Harrison's salary of $75K) but Altor would get the lions share with their interest rate. On the loans Altor is getting 11.5% and 15% 'guaranteed returns' with the status of being a secured creditor. For Harrison if Propel doesn't make a profit then that doesn't matter too much as Altor still get paid. Altor has taken a no risk position (with the exception of unrecoverable loans that Propel dish out).
A conflicts of interest is a problem where there are competing interests and obviously there are. Altor want the highest possible interest rate and Propel want the lowest. The Chair plays for both teams. If the Chair is removed from discussions and the terms are negotiated at arms length then the conflict of interest is managed. No issues there.
But how can investors be confident that is occurring when there was not full disclosure of the Chairs shareholding connection with Altor?
PHL Price at posting:
3.9¢ Sentiment: Sell Disclosure: Not Held
