Queries over $4.6m private credit lifeline for Magnis

Magnis Energy Technologies tapped private credit markets for a $4.6m lifeline despite signing a separate deal requiring it to consult its existing lenders.

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

Magnis Energy Technologies tapped private credit markets for a $4.6m lifeline, supposedly backed by a coterie of high-net-wealth investors, despite signing a separate deal requiring the ASX-listed graphite and energy play to consult its existing lenders.

Documents show a West Australian-registered company secured a loan against Magnis in early December, the same time the company locked in $4.6m in backing as it faced a cash call amid continued failures to turn a profit from a US battery gigafactory.

Personal Property Securities Register filings reveal a company called Corporate Mining secured a loan against Magnis last year, soon after a rush of administrative changes moved the company from the hands of a Perth-based accountant into the orbit of a Sydney property lender.

Corporate Mining is now controlled and owned by Koa Capital group finance manager Tal Erkes, with the company the only holder of debts secured against Magnis beyond a Canon printer lease.

Mr Erkes, who did not respond to requests for comment, does not control Koa Capital, which markets itself as a private player in Australia’s home lending market, but is linked to several other companies as either secretary or ­director, several of which were registered on the same days in August and October last year.

Koa Capital markets itself as a private player in debt markets, with the firm recently spruiking its “special situation lending” to companies in distress.

The loan, which Magnis signed in December but failed to reveal to investors until January, sees the company paying an eye watering 60 per cent a year, or 5 per cent a month, and came as the former market darling faced a dwindling till.

Company filings reveal Magnis had just $532,000 in the bank at the end of December, with interest on its $4.6m loan now far exceeding its former liquid reserves.

Magnis has been unable to repay the loan, which is now in its second extension and due for repayment at the end of April.

Despite repeated promises to the market, Magnis has been unable to secure new financial backers, either for its US battery project, which remains on ice amid a legal dispute with its key partners and lenders, or for a pie-in-the-sky African graphite project.

This marks a nadir for Magnis, which was worth almost $700m at its peak, with the company’s shares now having been suspended from trading for 130 days. The shares last trading at 4c.

The $4.6m debt’s registration appears to sit at odds with ­Magnis’s assurances to the ASX, after facing a barrage of questions, that it had been backed by a group of 32 high-net-wealth backers.

KOA capital group finance manager Tal Erkes.

Magnis company secretary Duncan Glasgow told the ASX in February a general security deed, “which by definition means that all assets of the company are ­covered”, had been taken out to secure the loan.

Mr Glasgow told the ASX there were “32 parties” behind the loan, saying Magnis was “prepared to make available to ASX, on a confidential basis, copies of each of the agreements with the counter­parties should ASX so require”.

But Magnis is faced with a dispute with lenders on its US battery gigafactory who have previously taken action after the company ­attempted to incur further debts without permission.

Atlas Credit Partners moved to seize control of the Imperium3 New York factory in December last year after Magnis attempted to engineer a boardroom coup and force the gigafactory into a new debt deal.

Magnis noted the lenders ­issued a covenant breach after saying they failed to seek its consent “prior to purportedly incurring additional indebtedness” at iM3NY.

Magnis has since made no revelations about efforts to refinance the $US100m debts of iM3NY, into which it has poured cash over recent years and which, despite repeated assurances, has not produced any batteries.

Shortly before registering its interests against Magnis, Corporate Mining saw a flurry of activity. The company appointed Mr Erkes as director, dumped Perth-based accountant Jay Stephenson and transferred ownership of the company away from a business called Seattle Capital, which has previously taken a number of stakes in listed miners.

Magnis locked in the backing of Mr Erkes’ company as it struggled to secure financing for its many projects.

This includes a massive $US320m project in Tanzania, where Magnis has proposed to build a huge graphite mine capable of producing 240,000 tonnes of graphite concentrate a year.

Magnis signed on Singapore-based fundraiser PEY Capital to source the funds for the project, signing an exclusivity deal with the group also known as PAI Capital and Iberica Investments International.

However, this exclusivity expired on April 12, with Magnis making no announcement of progress.

A peace deal with C4V, which prevented Magnis from attempting to change control of the holding company of iM3NY, has also expired, leaving open a chance to renew a conflict between the two which played out in Delaware courts in December and January.

Magnis is also faced with looming costs from plans to build an anode active material project in the US, after committing $3.5m to the plant last year.

This plant is intended to use graphite from Magnis’s Nachu project, which is now not expected to deliver ore until the end of 2026.

The company is also facing an Australian Securities & Investments Commission investigation over potential misstatements to the market.

Magnis and its chairman, Frank Poullas, did not respond to requests for comment.