eisa's salvation on hold

Austar's $13 million takeover bid for eisa has stalled following an announcement from regional TV network WIN that it was overlooked as a bidder for the struggling ISP.

Five key creditors - Telstra, C&W Optus, New Skies, Primus and KPMG, representing 90 per cent of eisa's $6.6 million debt - met last Thursday to decide the outcome of the pay TV and Internet service group's offer.

Before the meeting, Andrew Love, of eisa administrator Ferrier Hodgson, said he was "reasonably confident" the deal would go ahead and he would certainly be advising creditors to take it. "There are compelling reasons why the transaction should go ahead; there are no other deals on the table and the alternative will inevitably result in a receivership."

Austar is eisa's only secured creditor on a $7.5 million loan, which entitles it to a large piece of the ISP's remaining assets. These include its 80,000-strong retail subscriber list, as well as infrastructure, software and physical assets.

WIN has announced that the Austar deal was not the only offer on the table. John Rushton, WIN chief executive, said Ferrier Hodgson blatantly ignored the TV network's expressions of interest in eisa's regional operations by refusing to return phone calls and faxes. "We are interested in looking at the various aspects of eisa, discussing the pricing, and then deciding whether to make a bid; but so far we haven't be able to make contact," Rushton said. It was only after an article in the Australian Financial Review last Thursday detailing the brush-off that Ferrier Hodgson finally returned WIN's calls, and the Austar deal came to a grinding halt.

At the time, Rushton was hopeful that eisa's assets were still open for perusal. "We have our ISP operation WIN Net, which we do in conjunction with OzEmail, so we're looking for anything left of eisa that will fit with our existing operation or let us expand further into the field," he said.

In the meantime, Austar is providing the funds to keep eisa afloat, Telstra and Optus will continue to supply data services, and there have been no staff cuts.

Ferrier Hodgson's Love said the latest eisa figures showed a monthly loss of $500,000 to $600,000, a significant change from its previous plummet of $2 million. However, even if the Austar takeover goes ahead, there is no guarantee that any of the creditors will recover their funds. Love predicts a 45 to 60 per cent return and has confirmed there will be nothing left over for shareholders.

If the committee agrees to accept Austar's takeover bid, Ferrier Hodgson will approach the courts for approval and the deal will be finalised, along with the investigation into eisa's affairs, by mid-October.

With the current offering at $13 million rather than the originally proposed $24.4 million, eisa's elusive founder and major shareholder, Johnson Wang, will be forced into bankruptcy court. Eisa is also pursuing former chief executive Damien Brady through the courts for an alleged $230,000 in expenses he allegedly squandered.

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