Datalex shareholders approve €5m emergency loan from top investor Dermot Desmond
DATALEX has received shareholder approval for a €5 million emergency bridging loan from top investor Dermot Desmond - and aims to repay him via a rights issue and return to the markets.
The travel software firm has been suspended from normal market trading since May as part of an accounting scandal that forced Datalex to restate its delayed 2018 results from a healthy forecast profit to a staggering $50m (€45m) loss.
Yesterday’s extraordinary general meeting approved the second loan from Desmond-owned Tireragh Ltd, which in April provided Datalex €6.14m to keep the firm afloat.
Newly appointed chairman David Hargaden told shareholders if they rejected Mr Desmond’s increased loan offer, “the group’s ability to continue to trade could be placed into significant doubt”. Mr Desmond originally invested in Datalex in 1998 and today holds a 29.9pc stake. His loan terms include 10pc compounding interest and monthly reports on progress.
Datalex said the resolution received overwhelming backing. Mr Desmond and his proxies were excluded from the ballot.
Afterward, chief executive Sean Corkery and chief financial officer Niall O’Sullivan told reporters they still were negotiating to find a new external auditor following EY’s departure in September - when EY declined to offer any opinion on Datalex’s restated 2018 accounts.
When asked whether it would be possible to launch a rights issue - a special offering of new shares - without a parallel return to normal trading of shares, Mr O’Sullivan said: “Our advice is that it’s not impossible ... but it’s certainly more difficult. When you do a rights issue, you want to be able to set a value on the shares.”
They expressed hope that a new auditor would help them confirm first-half 2019 results by the end of November and advance discussions with Central Bank regulators on a return to the markets by March. Datalex already has warned that the first half of the year is likely to show continued heavy losses.
Mr O’Sullivan said Datalex’s top two priorities were to “demonstrate that our controls are back in shape” and to reassure investors about EY’s “audit disclaimer” on the 2018 accounts. “These are uncharted territories,” he said.
“We need to appoint a new auditor. We’re having discussions with the Central Bank which is a prerequisite to relisting,” Mr Corkery said. “Then we will do either a rights issue, or a rights issue and a relisting.”
The executives declined to comment on current negotiations with their top former client, Lufthansa. The German airline group announced in September it was terminating its contract for Datalex to develop a suite of e-commerce services following a string of missed deadlines and cost overruns. It is understood that the two sides are in mediation.
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