Hand up for CommQuest

Jun 24 2009 - Neil Shoebridge, The Australian Financial Review

Marketing services group CommQuest has found a saviour in Co-Investor Capital Partners, an investment firm that is backed by the Melbourne-based Victor Smorgon Group and specialises in small listed companies that are in trouble.

Co-Investor has bought out CommQuest's debt to Australia and New Zealand Banking Group, cutting its debt from $26 million to $13 million, and agreed to invest about $3 million in the company. Co-Investor's debt will be converted to equity in the next three to four months and CommQuest will make a rights issue.

Co-Investor managing director Roger Sharp has become CommQuest's executive chairman. CommQuest founder and chief executive William Scott will remain for about six months, then become a consultant to the company.

The deal with Co-Investor, which owned part of online retailer travel.com.au Limited until early 2008 and owns 68 per cent of small listed telecommunications company ComTel, marked the end of a restructuring program CommQuest began in February. The program was triggered by a $46.4 million loss in the December 2008 half, including a $45.3 million impairment charge. Several companies in the CommQuest group were hit by the downturn in media advertising markets. CommQuest has sold or closed eight companies since mid-April. It now has seven companies, including direct-selling business The Smart Group and digital marketing companies Next, Inspirus and SMS Central.

Mr Sharp said the seven companies were generating good cash flow and were growing. Co-Investor employed 27 people to conduct due diligence on CommQuest over the past month. "The market had given up on ComhQuest and decided it was heading for an early grave," Mr Sharp said. "We looked at the business and found it contained some good companies. It was a case of good business, bad balance sheet."

CommQuest shares, which were issued at $1 in November 2007, were trading at 1.5¢ when they went into a trading halt on March 23. The shares were suspended two days later. Mr Sharp said Co-Investor's lawyers were working out when the suspension could be lifted.