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: huge drop but picking up now. looks like a goo Not worth touching even with your money.

E&T faces wind-up threat

JULIE-ANNE SPRAGUE

A Sydney-based wine distributor has launched winding-up proceedings against the debt-laden Evans & Tate, delivering a potentially fatal blow to the WA winemaker.

Australian Beverage Distributors (ABD) said its application filed in the New South Wales Supreme Court yesterday would argue that E&T was insolvent and unable to pay its debts as and when they fell due.

It said the company should be wound up "to prevent the further dissipation in the value of assets available to unsecured creditors".

The application argues that E&T chief executive Martin Johnson could not be contacted and the company's newly-appointed public relations firm in Melbourne did not respond to requests for comment.

ABD is also seeking to block a crucial meeting of E&T noteholders in Sydney on June 14 that will decide whether to waive a financial breach of the note trust deed or demand repayment of their $20 million loan, potentially pushing the winemaker over the edge.

As reported in WestBusiness on Saturday, an independent expert's report by Ernst & Young sent to the convertible noteholders warned that the winery would be unable to pay a call for the $20 million without another lifeline from ANZ Bank, which was already owed $107 million as at December 31.

It also said E&T's ability to "source the funding required for the redemption of notes (on October 29, 2007) is not certain and cannot be guaranteed". And even after asset sales already announced, E&T was unlikely to "be able to generate sufficient surplus cash to enable it to retire any material amount of debt in the short term".

ABD claims it is owed $80,000 by E&T in court costs arising from a dispute between the two dating back to the WA company's takeover of Cranswick Premium Wines three years ago. The dispute relates to payment for more than $240,000 of wine ABD received from Cranswick before the takeover.

ABD's legal counsel, David Brooks, said E&T changed distributors after the takeover making it difficult for ABD to sell the wine. E&T refused to take back the stock and demanded payment, he said.

Mr Brooks said the NSW Supreme Court awarded ABD costs of $80,000 in March 2005 after E&T unsuccessfully moved to have the distributor wound up.

He said E&T was seeking to stop ABD from enforcing the cost orders.

Mr Brooks said the group was tired of waiting for the costs to be repaid and was worried that E&T's debt to ANZ would only get bigger.

"If noteholders do not take action now to recover their debts, the amount owing to the ANZ will continue to increase . . . (and) the amount of assets that will be available to noteholders and other unsecured creditors will be severely reduced," ABD said.

ABD also wants a separate report to be sent to noteholders highlighting the risks of E&T borrowing more money from the bank.

"An 80 per cent debt ratio provides comfort that even if the assets are sold at discounted values, there should still be sufficient returns to allow noteholders, and other unsecured creditors, to be paid 100 cents in the dollar," it said.