court evidence

I've just seen an article reporting the case in WA newspaper... I have to say this does not make the bondholders argument look strong.

The bondholders are trying to say that CMQ should not be counting the interest earned on the bondholders funds which were on deposit as part of the $4mil revenue target covenant. The interest earned comprised about $2.3mil of the $4mil claimed revenue.

The bondholders also questioned whether the revenue from the Inviro "sale" should be included, seeing as it has not subsequently been paid for.

Both these points are pretty weak: revenue is universally understood to include income from any source... the covenant did not specify that the $4mil had to come from sales alone.

With regards to the Inviro "sale", it appears CMQ were entitled to include it as sales revenue upon completion of delivery (as they have always been claiming). In once sense this would not be affected by subsequent events which are not under their control (whether the customer ends up paying for it). HOWEVER I remain convinced that CMQ agreed to allow Inviro to have the same terms that they have given to the other distributors in Malaysia and NZ, that is, the distributor only pays for the stock when they on-sell it to the end customer. It appears the bondholders were unable to obtain evidence that CMQ amended the deal for Inviro in this way. If that was indeed what happened and they had that evidence, CMQ would almost certainly lose the case.

Based on this I expect the case to be decided in CMQ favour, so it might be a good buying opportunity tomorrow if price remains the same!