One.Tel has been launched into administration, following due diligence which revealed a cash position that was significantly worse than first disclosed by the company.
The company's auditors, Ernst & Young, informed the Board that the $132 million rights issue proposed by backers PBL and News Limited would be insufficient to keep the company solvent. Previously, the Board had been told that the $132 million injection was "prudent but not necessary" - a statement that has now raised the ire of PBL's James Packer and News Limited' Lachlan Murdoch.
"Like all shareholders we are angry. We have been profoundly misled as to the true financial position of the company," the pair said in a joint statement to the market.
"We intend to explore all remedies available to us."
Steve Sherman, one of the administrators from Ferrier Hodgson, said that it would be "business as usual" for the company's staff and customers, as a review of One.Tel's operations was conducted and discussions are held with major creditors to determine the best course of action. However, he noted that One.Tel will "continue to trade as a going concern."
PBL and News, who abstained from the vote to quash the rights issue, supported the actions of the administrators in their statement.
"We welcome the Administrators' assurance that One.Tel would continue to trade as a going concern and that they would seek to identify the best ways of maintaining One.Tel's value for the benefit of all shareholders and creditors," it read.
(Story courtesy of The Australian Industry Standard.)