NBL nets stake in Pathion as shirt deal flops

Larry Kestelman’s National Basketball League has been forced to take a shareholding in a US renewable energy company.

Larry Kestelman in Melbourne. Picture: Stuart McEvoy

Larry Kestelman’s National Basketball League has been forced to take a shareholding in a US renewable energy and storage company in an effort to recoup more than $1 million in unpaid sponsorship, after taking court action to wind up its Australian subsidiary.

The highly unusual agreement was struck after the NBL and the Brisbane Bullets basketball club, both owned by rich-lister and property developer Mr Kestelman, were each left $550,000 out of pocket after an Australian subsidiary of US renewable energy company Pathion, headed by a man accused of fraud, failed to pay a cent under a shirt sponsorship deal.

Mr Kestelman, the owner of luxury developer LK Property Group who founded internet and phone company Dodo before it was sold in 2013, owns the NBL and the Bullets.

A Victorian Supreme Court judge this month ordered US-based Pathion’s Australian subsidiary be wound up, after the NBL had applied for the orders following non-payment of sponsorship deals struck in November last year.

Pathion had not sent any legal representation to the hearing.

But after frantic negotiations last week with Pathion’s US-based management, the NBL has agreed to take equity that would ensure it recoups the $1.1m owed once ­Pathion raises an estimated $US30m ($42m) from private investors. Fundraising documents are set to be lodged with the US Securities and Exchange Commission.

NBL chief executive Jeremy Loeliger told The Australian the move was necessary in order for the league to receive its funds owed. “The local management team was not able to raise sufficient capital to fund the Australian subsidiary and as a result, Pathion Australia was unable to pay NBL or the Brisbane Bullets the full amount of the agreed sponsorship,” Mr Loeliger said.

“The parent company has stepped in to offer the NBL a novel approach to settling the matter, which will effectively result in the NBL becoming a shareholder in the US company and discharge Pathion Australia’s debt to the NBL, while also providing the NBL with a continuing investment in US-based Pathion.”

The winding-up order had raised questions about Pathion’s other sponsorship deals with ­National Basketball League team Adelaide 36ers and Brisbane rugby league team Norths Devils, a feeder team to NRL side ­the Brisbane Broncos.

But Pathion Australia director Craig William Froome said the company had not breached its sponsorship contract with the Devils and got the 36ers deal for nothing as part of a package deal with Mr Kestelman’s NBL.

He told The Australian that although he was a director of the local company “everything gets paid out of the US”.

“There was some money paid to the NBL and it was paid out of the US,” Mr Froome said.

According to a sponsorship agreement filed with the court by the NBL, Pathion failed to pay $550,000 (including GST) for the shirt rights to the 2017-18 season for the Bullets, payable in equal instalments from December last year to April this year.

An additional $600,000 was to be paid for the upcoming season, with a $5000-a-game bonus if the side reached the playoffs.

But Mr Froome said the sponsorship deal had been varied and the payments for the 2017-18 ­series were only about eight weeks late.

“There’ve been many modifications to that, which have been agreed between the parties,” he said.

He said he expected fraud charges laid against him last year after a Queensland Crime and Corruption Commission investigation into his time at the University of Queensland would be dropped when the case returned to court on September 17.

Mr Froome was charged with fraudulently using a travel card in 2015 and forging an invoice “with intent to defraud” the following year.

“My signature appeared on two documents and even when the police interviewed me they didn’t believe it was my signature,” he said.

He said the travel card allegations were “dead and buried”.

“It was approved travel and they complained about it, and we repaid,” he said.