Origo believes that there would be a “significant cost” to opposing the move by Brooks Macdonald, which claims that it would be “just and equitable” to wind the company up.
Brooks Macdonald’s motivation is reportedly related to the terms of a £30m ($42.7m, €38.7m) convertible zero-dividend preference share (CPS) issue launched by Origo in March 2011.
Spearpoint, which was acquired by Brooks Macdonald in November 2012, subscribed for a “significant proportion” of the CPS, resulting in Brooks Macdonald now controlling 85.7% of the shares.
Under the current terms, the CPS would be automatically converted into shares in the case of a change of control, but Brooks Macdonald has contended that the provisions should have included an option to redeem the CPS instead.
According to Origo: “[It] has given serious consideration to the concerns raised by Brooks Macdonald and remains committed to attempting to working with Brooks Macdonald to achieve a mutually acceptable resolution to the concerns it has raised.”
Unable to redeem
On 29 September 2015, Origo advised: “The continuing uncertainty in relation to the Chinese economy and depressed commodity markets have meant that realisations of the company’s assets at attractive valuations have been challenging in the short term.
“Whilst the company continues to seek to deliver the objectives of its investing policy and to achieve an orderly realisation of its assets, it remains likely that the company will not be in a position to redeem $12m of zero dividend preference shares (CZDPs) by the due date of 8 March 2016.”
Proposal
On 19 January 2016, Origo posted a circular to its shareholders proposing a restructuring of the company’s share capital, which would have, if implemented, served to settle the ongoing legal dispute with Brooks Macdonald and provided Origo greater flexibility to implement its orderly realisation strategy.
The proposals failed to receive the necessary 75% approval and were therefore not implemented.
Trading suspended
An announcement on 8 March confirmed that Origo would be unable to meet its redemption obligations.
Pending clarification of Origo’s financial position, and at its own request, trading on AIM was suspended on Friday 11 March.
An initial hearing is scheduled to be held at the Isle of Man Courts of Justice at 10am on 7 April 2016.
In a statement on Friday, Origo said: “Whilst the company’s daily operations should remain broadly unaffected, disposals of its assets without court approval may be rendered void and therefore there are likely to be challenges in implementing its investing policy pending the outcome of the initial court hearing.”
