The group, which posted a net loss of AUD60.9m for the six months to December 2011, has confirmed that any further payments to holders of its Hybrid SPS shares need to be approved by the Group’s main lender and that it is unlikely that any payments will be made until there is a "significant improvement in trading conditions".

The group’s executive vice-president Dave Allen said: "Paperlinx is in compliance with all its banking covenants and the company’s bank has increased covenant headroom. Paperlinx is retaining cash within the business by not making discretionary interest payments to holders of Hybrid Step-up Preference Shares. Any future distribution also requires the approval of the Group’s largest bank lender."

Paperlinx received a private equity takeover bid for its entire share capital in January, as well as for the Step-up Preference Securities, at a price of AUD0.09 and AUD21.86 respectively.

Tom Elliott, chief investment officer at Beulah Capital, an Australian-based investment services business, said the suspension of SPS interest payments was further evidence of the company's financial situation.

"This indicates that Paperlinx is now in the hands of its bankers and the private equity bidder," he added.