PaperlinX to broker deal between equity, hybrid investors [IMG]...

PaperlinX to broker deal between equity, hybrid investors
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PaperlinX shareholders meet in Melbourne on Friday.

• by
• Sarah Thompson
• Anthony Macdonald

PaperlinX chairman Robert Kaye is finally ready to bite the bullet.
It is understood Kaye will play peacemaker at the company's annual general meeting in Melbourne on Friday and offer to broker a deal between his company's warring shareholders and hybrid-owners.
PaperlinX has been operating with a dysfunctional capital structure for much of the past decade. After a massive asset sell-off, the company is still weighed down by $285 million in hybrid securities issued to mostly retail investors in 2007, which now render its equity almost worthless.
The logical thing for years has been for the equityholders to cut a deal with the hybrid owners. However, the two sides are poles apart in value and the board is stuck running a company that can barely stay afloat, let alone map out a prosperous future.

Should Kaye step in, as expected, it would be a well overdue move. Hybrid owners are on high-alert after the company flagged it would seek to renegotiate the terms of its debt in its annual report last month. It was the first mention from PaperlinX that it was seeking to address the matter.
Complicating the matter is that the hybrids were set up under an intercompany loan structure, sparking fears PaperlinX may be able to renegotiate the terms of the loan with itself and potentially hitting investors.
The hybrids, which were issued at $1, are trading at about 13¢. Whether hybrid-holders and shareholders are willing to talk, though, is another matter.
The other thing on the nose with investors are payments made to one of the shareholders, Communication Power Incorporated (Aust) Pty Ltd, for property advice. CPIA is mostly owned by Laurence Rodny, who is close to the chairman Robert Kaye.


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