Magnis faces control battle for battery gigafactory

A lender to a Magnis subsidiary has warned it intends to take control of ‘voting, corporate, consenting and other organisational rights’ for the firm’s battery gigafactory.

Magnis US managing director Hoshi Daruwalla, left, and chairman Frank Poullas in Sydney last month. Picture: John Feder

Atlas Credit Partners, the lender to a Magnis subsidiary, has warned it intends to take control of “voting, corporate, consenting and other organisational rights” for Magnis Energy Technologies’ battery gigafactory.

In an update to the market on Friday, ACP warned it had found two further alleged breaches of covenants on its $US100m ($150m) loan to Magnis’s battery subsidiary Imperium3 NY.

Magnis said it had “recently” been made aware of the alleged breaches, just one day after the ASX-listed company’s annual general meeting.

Magnis added that the default notice alleged iM3NY had breached a covenant after the removal of its then chief executive Chaitanya Sharma.

Mr Sharma was removed by Magnis on November 15 after the company claimed to seize control of the board of iM3NY.

Magnis’s key partner in iM3NY, battery technology company Charge CCCV, has launched legal action over the move alleging the action was illegal and claimed it was accomplished by chair Frank Poullas and director Claire Bibby muting the microphones of other directors on the call before ramming through motions.

Magnis also revealed that the lenders claimed a covenant had been breached after iM3NY allegedly “failed to seek its consent prior to purportedly incurring additional indebtedness (with this indebtedness owed to Magnis)”.

In its market update, Magnis said Atlas Credit Partners also warned they would exercise their rights over iM3NY under the $US100m credit facility with the company.

“The purported intention by the lender to exercise its rights, if legally valid, may result in the lender being able to change the composition of the board of the borrower and take control of its operating and financing activities,” Magnis said.

“Magnis notes that no conduct has been taken in relation to the board of iM3NY. The potential impact on Magnis of these purported actions is not yet known.”

The latest breaches from iM3NY’s lenders came after Atlas Credit Partners served six alleged breaches on Magnis on November 10.

This saw iM3NY pinged for failing to maintain working capital at agreed levels, running up debts to suppliers, failing to pay interest, as well as failing to operate more than half the machines at the factory “to specification”.

Magnis said it was “considering what legal options may be available” but was also attempting to resolve “various outstanding matters” with the lenders by seeking alternative financing for the $US100m facility

The company noted it had “reiterated” at its AGM its plans to attempt to refinance iM3NY’s debts.

“Please note that there can be no certainty that a resolution acceptable to the lender will be reached and/or that the borrower will be able to obtain alternative financing on terms acceptable to the borrower (or at all),” Magnis said.

In papers filed in the Delaware Chancery Court, C4V claimed Magnis was “effectively insolvent” and only being kept afloat by counting the value of iM3NY against its balance sheet.

“This also presents risk to the Magnis-affiliated manager on the iM3 board, who also serve as Magnis directors and appear to receive significant consultancy fees for Magnis even as it spirals into insolvency,” C4V alleged.

Magnis has made several promises to C4V to secure more funding for iM3NY, including allegedly offering “to source additional funds for iM3 on oppressive, one-sided terms set forth in a term sheet from an unknown lender”.

However, C4V claimed Magnis has failed to secure further funds.

Shares in Magnis fell as much as 9.8 per cent during the day before recovering to close down 5.88 per cent at 4.8c.