RMG buys $50 million pack of doubtful debts

By PAULA OLIVER

Penny-dreadful debt collector RMG hopes a new A$50 million ($54.7 million) deal will quash rumours about the sudden departure of its high-profile chairman Michael Stiassny.

RMG, partly owned by entrepreneur Eric Watson, issued a profit warning in late May and Stiassny turned his back on the company just six days later.

It has since fought rumours that there was more to the split than the publicly stated reason that Stiassny had too many commitments and could not devote enough time to RMG, which is expected to return a significant loss for the just-completed June year.

It has announced that it is expecting to report earnings before interest, tax, depreciation and amortisation of around A$500,000. .

Yesterday, the company's acting chairman and managing director, Ron Logan, said he had signed a deal to buy a portfolio of banking receivables with a face value of A$50 million.

He would not reveal how much the deal had cost or the identity of the financier who had backed it.

But he said the deal was part of what was referred to in May when he stated that the profit downgrade could be mitigated by a new contract.

"You might say how can it have an impact when we've only just signed it," Logan said.

"Well, obviously the effective date might be a little bit earlier."

Just how much the new contract will affect RMG's result for the financial year that ended yesterday is unknown because Logan and his team are "still working through the implications of it".

But he was upbeat that there would be more deals involving the mystery financier, which is thought to be an Asian fund doing its first deal in the sector in Australasia.

He was also hopeful that the new deal would quieten questions about Stiassny's departure.

"It might help underpin some of Michael's comments about the background to his departure," he said.

"He has very clearly stated it was an issue of priorities, and it wasn't because he had a fundamental issue with the company."

Stiassny joined RMG as a director in 2002 and became chairman last year to oversee a turnaround that has not yet happened.

He is chairman of Metrowater and the power company Vector, as well as being a partner in accountancy firm Ferrier Hodgson.

Stiassny resigned from the board of Spectrum Resources just two days before he left RMG.

Logan conceded that RMG's board was "a bit skinny at the moment", with only three members.

There is no independent director.

He said he hoped to get that sorted out as soon as possible after the annual figures were finalised.

The company was also anxiously awaiting the outcome of an options offer which it hoped would raise A$9 million ($9.8 million) to sort out its debt lines, reduce interest costs and properly capitalise its operations.

At the moment the options are not in the money and if that does not change before the end of October, Logan faces the prospect of an alternative capital raising effort such as a rights issue.

RMG's shares closed on the NZX yesterday at 2.8c.