Creditors put New Tel into liquidation
January 14 2003
By Colin Kruger
Sydney
Creditors of the small telco New Tel bit the bullet yesterday and put the company into liquidation but a string of possible legal actions means that won't be the last that investors hear from one of the more colourful corporate failures of 2002.
In a split vote, which was decided by the administrator's casting vote, liquidation was chosen over an adjournment to consider a third rescue bid from Broadband and Wireless (BWL).
The company's bid, which ensured the support of small creditors with a guaranteed payout of their debts, did not win the crucial backing of the major creditors.
The decision arms the New Tel administrators, PricewaterhouseCoopers, with additional powers that are expected to yield up to $15 million for creditors, according to PwC liquidator Phil Carter.
He said liquidation was usually avoided because it harmed the value of the company's assets, but this was not the case with New Tel because the "vast majority of its assets are legal actions".
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The company will also have its network and customers to sell, and several parties are interested, according to PwC.
On the legal front, former New Tel boss Peter Malone may risk losing his $400,000 customised Aston Martin, but Mr Carter nominated the $5 million deposit paid in the failed acquisition of Digiplus as an early target.
Most of the telco's 220-odd creditors still risk a reduced payout on their debts.
New Tel's debts are estimated at up to $50 million, with Telstra and Optus owed more than $20 million combined. Total unsecured creditors' debts total about $40 million, according to PwC.
The main questions now are: can it be proved that New Tel traded while insolvent, and if so for how long; and what legal actions the liquidators will pursue.
In its creditors' report released earlier this month, PwC said the company might have been trading while insolvent for up to a year before administration.
In liquidation, administrators can investigate and legally undo preferential payments to creditors up to six months before administration, ditto with uncommercial transactions going back two years, and related party transactions going back four years.
The administrators can also take action against directors and other officers if New Tel is proven to have traded while insolvent last year.
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