CommQuest rescue plan in jeopardy over legal claim

Beleaguered digital media firm CommQuest has revealed that its white knight investor could pull out of a deal to recapitalise the company if a legal claim from another investor is successful.

As reported yesterday, CommQuest shareholder Lazard Carnegie Wylie has launched a $3.22 million claim against the company alleging breaches of warranty and contract. CommQuest has disputed the claim.

But that has not stopped investment company Co-Investor, which said in June it would pump around $13 million into CommQuest to help it reduce debt and recapitalise, from advising CommQuest that it may pull its investment if LCW’s claims are substantiated.

“The company is currently working with Co-Investor to provide it with further information in relation to the claims contained in the Letter of Demand,” CommQuest said in a statement.

CommQuest has also released its financials for 2008-09, revealing a net loss of $52.2 million, compared with profit of $1.9 million in 2007-08.

The result was marred by $53 million worth of writedowns on the value of CommQuest’s assets, as the company disposed of six businesses and sold another four.

“The company’s poor performance is attributable to a range of factors including poor operational execution, a challenging macroeconomic environment, the underperformance of a number of subsidiaries, and an inability to service the company’s debt,” the group said in a blunt statement.

Chief executive William Scott will leave on September 30 and Co-Investor managing director Roger Sharp will become executive chairman of the company.

The company will also ask its shareholders to approve a rebranding of the company at its annual general meeting in November.