VDM punished for customer dispute

MINING and construction contractor VDM Group saw its shares fall 47% this morning after announcing a dispute with a “major customer” had resulted in the company’s removal from a project site and the renegotiation of critical funding.
VDM punished for customer dispute VDM punished for customer dispute VDM punished for customer dispute VDM punished for customer dispute VDM punished for customer dispute

 

Justin Niessner

The contractor said an unnamed client had issued a “customer notice” relating to a dispute over the status of a material contract.

“The company received a notice from the customer purporting to exercise its right to take the whole of the remaining works under a contract out of the hands of VDM,” it said in a statement today.

“The effect of this notice may materially impact the operating performance and short-term cash flows of the company.”

MiningNews.net was unable to contact a spokesman for the company before time of publication.

The group entered into a trading halt on August 22, which it said immediately followed on the receipt of the customer notice.

On August 23, managing director and chief executive Andrew Broad stepped down, replaced by chairman Michael Perrot as acting chief executive.

As a result of the dispute and VDM’s removal from a project site, the company has terminated an existing share subscription agreement with H&H Holdings Australia and negotiated an alternative capital raising arrangement.

The new arrangement – unanimously supported by the VDM board but still contingent on shareholder approval – would provide for an initial $A6.4 million in funding plus the opportunity to acquire a further $5 million loan.

In the event VDM requires a further loan, it could have access to up to $11.4 million of funding over the next 12 months from H&H.

Terms for the initial $6.4 million provision include the placement of 140 million shares to H&H at 1c each to raise $1.4 million, and the appointment of H&H owner Dongyi Hua to the board of VDM and as the contractor’s managing director.

H&H’s Xiangyang Ru would also be appointed to the board and a third H&H nominee, expected to be Ming Guo, could be appointed following the conversion of the loan.

The arrangement will result in H&H taking 43.5% of all VDM shares on issue at the time.

VDM is required to use its best endeavours to hold a shareholder meeting on the issue within eight weeks.

Shares in VDM were down 47.1% today at 0.9c.

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