ERG settles remaining liability to Proton World...

ERG settles remaining liability to Proton World International
Source: SYDNEY, Sept 7 AAP
Published: Tuesday September 7 2004, 5:02 PM

Smart card group ERG Ltd today said it had settled its remaining liability to the vendors of Belgian smart card business Proton World International (PWI).

ERG, which bought PWI at the height of the tech boom and sold it 18 months later at the bottom, said the transaction completed a strategic restructuring of its balance sheet over the past 18 months.

It said the settlement was at a discount to the face value of the total debt owed as at June 30, 2004, and that it would deliver a one-off profit of approximately $22 million to ERG in the first half of 2004/05.

"The settlement of the Proton World liability is an important part of the transformation of the company's balance sheet," ERG chief executive officer Dr Allan Sullivan said. advertisement

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"This transaction gives ERG a strengthened balance sheet with very low gearing.

"Following the settlement of the Proton World liabilities, and the conclusion of the well-supported rights issue, management is now concentrating on maximising profitability from our work in progress and winning new business opportunities," he said.

Under the terms of the agreement between ERG and the former shareholders of PWI - Banksys SA, Visa International Service Association and Interpay Nederland BV - approximately $40 million of liabilities will be extinguished in exchange for an up-front cash payment of approximately $16 million to the former shareholders.

ERG said the up-front payment had been funded from the proceeds of a July rights issue in which it had raised $67 million.

As part of the agreement, the former PWI shareholders have also been issued with 7.5 million shares based on the rights issue price of 20 cents each, and will be eligible for a further five million shares if ERG meets future share price targets.

A residual liability due by ERG of approximately $14 million will be retained but is repayable based on its future profitability.