PERTH (miningweekly.com) – ASX-listed Kidman Resources on Monday launched litigation against debtor KBL Mining and two of its directors in the Victorian Supreme Court in a bid to prevent a noteholder meeting from proceeding.

The litigation relates to proposed amendments to the terms of KBL’s convertible notes.

Kidman claimed that the resolution to be considered at the December 10 noteholders meeting indirectly included a proposal to increase the ratio at which the notes could be converted to ordinary shares in KBL from one-to-one, to one-for-three.

The company also said that there was no specific resolution on the proposed change in conversion ratio, which potentially diluted existing ordinary shareholders.

Other changes proposed by the resolutions include an extension to the maturity date of the notes and an increase in the interest rate paid on the notes.

KBL said that the court process filed by Kidman would not prevent the noteholder meeting from proceeding on Wednesday, but said at this point that it was not clear if the amendments were approved at the meeting, how the Court hearing timetable could affect the timing of the amendments becoming effective.

Meanwhile, Kidman also formally requested that KBL provide the company with essential information regarding its financial position, claiming concern about KBL’s ability to repay a A$12.6-million debt owed to Kidman.

Kidman became a major shareholder and the owner of KBL’s principal secured loan facility, taking over some debt owed by KBL to shareholder Capri Trading. The A$12.6-million debt now owed to Kidman was secured against all of KBL’s assets, including its operating Mineral Hill base metals mine and its Sorby Hills lead/silver deposit, in Western Australia.

Kidman was attempting a board spill at KBL.

Kidman warned KBL that if the requested financial information was not made available by mid-day December 9, it would constitute an event of default under the security agreement.

Furthermore, if KBL should prove insolvent for the purposes of the security agreement, KBL would also be in breach of the agreement, in which case Kidman would be entitled to issue a default notice.

KBL said it had made a formal report to the Australian Securities and Investment Commission as to Kidman’s persistent failure to disclose full and complete information in relation to its holding in KBL, pointing out that if the company repaid the A$12.6-million loan by the due date, the acquisition of the loan would be wholly reversed, meaning that Capri Trading would be repaid while Kidman would not receive anything.

However, if KBL defaulted under the loan agreement, Kidman would have the right to enforce security over and gain control of all KBL’s assets.

KBL said that as a result of this agreement, Kidman had no interest in enabling the company to repay the loan and based on its attempts to frustrate KBL’s refinancing efforts, the company could only conclude that this was a “calculated” attempt by Kidman to seek default under the loan agreement.