interest calculation on debt

According to the interim report, Metropolis City Promotions Pty Ltd owed PPN $2,712,930 as at 30 June 2013.

Interest of $190,995 was calculated on the original 2003 loan balance of $2,110,000 at 9.05%. [9.05% x $2,110,000 = $190,995]

As the loan balance continues to blow out each year by $190,995, PPN is NOT getting any interest on the outstanding loan balance, a free gift to Trimble at shareholders expense.

This free gift is contrary to the terms of the Loan Facility Agreement [Agreement] executed by Trimble on 13 June 2003 on behalf of Metropolis City Promotions Pty Ltd, Cameron Lane Pty Ltd, Daily Planet Australia Pty Ltd, Clover Dale Pty Ltd & MCP Investments Pty Ltd as guarantors for the debt.

Under Clause 1.1 of the Agreement, the Facility Limit is $2,110,000 and the commencement date is 21 February 2003. No problem there.

Clause 5 says that interest on the amount owing will accrue from day to day during each interest period and be calculated daily on the basis of a year of 365 days and the actual number of days elapsed at the Higher Rate applying from day to day during the interest period. Interest on the amount owing will be payable monthly in arrears.

Why is it that the directors of PPN have allowed Trimble to receive the benefit of a beneficial interest calculation contrary to the terms of the Loan Facility Agreement? This can't be in the interests of the company as a whole and benefits one person only, Trimble.

At the AGM in March 2003 we were told that the directors were unaware of the existence of the Agreement. A consultant at the AGM commented that the directors never asked for it.

I note that the interim report says that the directors extended the term of the loan on 1 January 2012. Trimble can't be in the room when this is discussed, so who were the directors who extended the term of the loan and why did they did so without having read the original agreement?

John Callanan was appointed to the PPN board on 26 August 2011. He told us at the AGM & GM this year that he had never seen the Agreement until I brought it to his attention.

The other director in office at 1 January 2012 was Dragan Micovski. Technically he remained a director until his official resignation on 4 April 2012 despite having been sacked as manager of Bar20 in about October 2011 after laying several punches on a customer at Bar20. [I watched the replay at VCAT]

We heard evidence at VCAT that Micovski attended very few, if any board meetings as his job was to manage Bar20.

The 2012 annual report shows that only 2 board meetings were held in the 2011/12 financial year with Trimble attending both, Micovski and Callanan each attended only one. I doubt very much whether that was on New Years day 1 January 2012.

So who was present at the board meeting when the document was signed on 1 January 2012 extending the loan term until 30 June 2014 with interest to be calculated on the original balance only contrary to Clause 5 of the Loan Facility Agreement?

I would love to see, or have the auditor see, whatever document was signed on 1 January 2012 and who signed it. It would have been totally inappropriate for Trimble to have been present at that board meeting if it in fact occurred.

The auditor needs to read the Loan Facility Agreement and amend the outstanding loan balance retrospectively with the interest calculated according to Clause 5. The directors need to lift their game and hold Trimble accountable after having let down the minority shareholders.

If PPN doesn't have a board quorum by 30 June 2014, Trimble's debt will become payable on that date and there will be no friendly directors to help him out with another extension.

The auditor says on page 64 of the 2012 report:
"........ Metropolis City Promotions Pty Ltd is not capable of repaying the loan, and traditionally dividends payable to another entity related to Mr John Trimble have been offset against this loan balance. The company has not been able to provide us with sufficient appropriate audit evidence to demonstrate the recoverability of this related party receivable......."

By the way, as I predicted earlier this year, Robert Bottazzi will not be joining the board of PPN. Don't hold your breath waiting for an ASX announcement.