ERG investors agreed to a restructure yesterday that will strip the smart-card operator of its assets and leave the NSW Government with a corporate shell as the target of a legal claim of $89 million over the failed TCard project.
ERG will have to borrow funds for a proposed $200 million counter-claim against the Government which holds out the only promise of a return for long-suffering ERG shareholders who have watched the company bleed money almost continuously since the days of the dotcom boom.
"I think we've got a very strong defence and a very strong counter-claim," ERG's chairman, Colin Henson, told shareholders yesterday. He said the company was "financially crippled" by the NSW Government's decision to terminate the contract earlier this year.
"We find is irresponsible that the NSW Government chose to abort a system that was so close to delivery," Mr Henson said.
The Transport Minister, David Campbell, said the Government was taking all reasonable action to protect its position, including liaising with the Australian Securities and Investments Commission.
"We are, of course, monitoring the impact of any company restructure as we seek to recover taxpayer funds via the legal process," he said. The restructure, which will strip ERG of its business as well as its name, reflects the company's dire straits and its dependency on loans from the businessman Duncan Saville for its survival. The transaction will effectively hand Mr Saville all of ERG's business assets in return for the forgiveness of $115 million in debt ERG owes him.
Mr Henson defended the restructure yesterday which, in the words of one shareholder, gives Mr Saville the business and leaves them with "bugger all".
"I don't believe this company would be existing today if it wasn't for Mr Saville," Mr Henson said.
If the company collapses, ERG is not expected to have enough money to pay Mr Saville's loans which have priority over most other creditors, including any government claim. ERG has slowly bled to death after many troublesome projects and write-downs.
ERG shares, which once traded at the equivalent of $26.43, closed at 0.6 cents yesterday.