Creditors, shareholders hear Mosgiel choices

Press, 14 April 1984, Page 24

Creditors, shareholders hear Mosgiel choices

PA Dunedin More than 100 creditors and shareholders of Mosgiel, Ltd, have heard that a minuscule part of the failed woollen mill group may yield them a better return than present prospect at the end of the receivership. Mosgiel Textiles, Ltd, was set up by the parent company with a capital of $lOO merely to safeguard copyright of the name. Although a wholly owned subsidiary, it had no assets and thus was not a signatory to the debenture trust deed. “It has, therefore, never been in receivership and has remained under the control of the directors,” said Mr D. L. Wood, a solicitor who was recently elected director of Mosgiel. He acted as chairman at the informal meeting. It was obvious to the directors and the receivers that could Mosgiel Textiles resume trading in some form or other and generate income it would be in the best interests of both shareholders and unsecured creditors, he said. It became party to a technical services agreement with a finance house last June, and has so far

generated $153,000 in income. “Should this project be able to continue for six years, income could be generated to a figure that could result, along with the orderly disposal of land and buildings, in unsecured creditors being paid in full with possibly some return for preferential and ordinary shareholders,” Mr Wood said. He added that Mosgiel, Ltd, had incurred losses of $13.5M which are available to be carried forward so long as there is a 40 per cent common shareholding. “It is for this reason the directors have asked shareholders not to trade their shares,” he said. Referring to this week’s bid for 19.9 per cent of the Mosgiel preference shares by Merchant Funds, Ltd, of Auckland, Mr Wood said if the target figure were reached some SSM of losses could not be offset against future profits, under the terms of the Income Tax Act. “It must be stressed that the Mosgiel Textiles project is still at a very preliminary stage,” he said. “Its future success depends on the continued injection of capital from the finance house under the terms of the agreement that has been negotiated.” “Your directors cannot guarantee the success of the arrangement but they can say this — if it does not come up to expectations there will be no loss either to creditors or to shareholders.” Mr R. B. Wilson, of Merchant Funds, Ltd, repeated

the company’s offer of 10c per 13 per cent preference share, payable in 21 days, or 50c a share, payable in 1989. He challenged Mr Wood’s statement that the shareholders had nothing to lose by falling in with the technical services agreement. “If this were regarded as a ‘device’ by the Inland Revenue it could be set aside. But there was something to gain from his offer, which closes on April 30 or on receipt of 947,000 shares. He also asked why the finance house had not been prepared to buy out/the unsecured creditors if Mosgiel were such an attractive proposition. / Mr David Bottirig, of Broadbank, responded by saying that when /Mosgiel’s shares were falling rapidly in 1980 he bought 400,000 shares (150,000 preference), many for about 2c each, not knowing whether they would be a personal holding or for his company. Broadbank took them up. Broadbank worked hard in 1980 to keep Mosgiel out of receivership. It was not until 1983 that possibilities of doing something with the company emerged. At that time finance companies were doing well, but with new regulations it is a more difficult situation. Mr Sotting said the agreement would not affect Mosgiel’s assets. If it were successful Broadbank stood to gain in three ways, as a creditor, as a shareholder and through a merchant banking fee. Mr Eion Edgar asked Mr A. Anderson, the receiver, whether preference shareholders could expect to

receive all outstanding dividends since 1980 if the arrangement was successful. Mr Anderson agreed that this was so. Mr Edgar said later that this made them worth 150 c. Another possibility is in the hands of the unsecured creditors. They can petition the winding up of the company and appointment of a liquidator at any time. This would mean the end of the company and of the association with the finance houses. “It is the present opinion of the directors that this step would not be in the best interests of unsecured creditors and certainly of shareholders,” Mr Wood said. The financial position now is that secured mortgages and cash amount to $660,000. Book value of Roslyn Mill is $1,250,000 and of plant and machinery $40,676. According to one of the many chartered accountants present, cash and mortgages represent 20c in the dollar for creditors. Mr Wood said all assets are worth 70c in the dollar though legal proceedings could cut this to 50c. However, if there were a forced sale of the assets not even their book value could be expected. Although no final decisions could be made at the meeting the directors sought some machinery to ensure that the interests of the creditors along with the shareholders could keep negotiations and transactions under review. At the conclusion of the meeting representatives of four major creditors agreed to form a sub-committee, though these four, from Whitcoulls, Stewart Transport, the “Tablet” and Europa Oil,- noted that they had no powers to speak for the rest.