Five Paperlinx hybrid security holders have moved to protect their investment by pushing for a constitutional change.
The current hybrid securities constitution allows Paperlinx to decide how the hybrid securities are realised. The five investors want the hybrid holders to be able to determine how the hybrids are bought out.
The investors have contacted The Trust Company, the entity responsible for the hybrid securities, to request an extraordinary general meeting (EGM) of hybrid holders. The Trust Company said in a statement that it was "considering the validity of this request" and whether the investors hold at least 5% of the votes.
One of the five investors is Graham Critchley, who is convenor of Paperlinx PIGS, a group that represents some hybrid securities holders.
[Related: Paperlinx posts $90.2m loss]
Critchley told ProPrint that the investors had been planning the move for some time, and that it wasn't made in response to Paperlinx's recent announcement that it planned to buy back the hybrid securities as a first step to altering the company's capital structure.
The EGM would only be open to hybrid holders. Critchley said he was confident they would support the constitutional change because it would give them more control over their investment.
"We'd be taking the power of determining the realisation method away from Paperlinx and putting it to a vote of the unit holders," he said.
Critchley has previously voiced fears that Paperlinx would try to buy back the hybrids for far less than their initial valuation of $100.
He told ProPrint: "We're open-minded [about a valuation] but we want to control this important process and the reason we want to control it is that Paperlinx is on record as saying it has no fiduciary obligations to the hybrid holders."
Update: Paperlinx was still working on a comment when the article was published. A spokesperson later provided this comment: “Paperlinx has announced it will be developing a proposal to put to hybrid investors designed to simplify the company’s complex and sub-optimal capital structure.
"This response from a small group of hybrid holders serves only to disrupt the efforts of the company from the very real task of addressing this issue at the same time as it is implementing its broader turnaround effort.
"One party attempting to change the commercial terms of its investment will not go any way to resolving the current situation as Paperlinx will be seeking an outcome that is in the interests of all stakeholders including ordinary shareholders, rather than just the interests of a minority.”
[Related: Ups and downs of Paperlinx]
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