Chairman Roger Corbett has a problem at Fairfax Media: one of his trio of new directors, Linda Nicholls, has sprung a leak with problems emerging at two of her other boards, including one where she is the chair.

The most serious problem is at Sigma Pharmaceuticals, where she is a long-time director. The company is due to make a statement tomorrow that will confirm it has suffered huge losses and write-downs, which suggest the group is all but broke and in the hands of its banks.

The move will distress chemists as Sigma is the biggest supplier of products to its own and other chains and independents. It is also the country’s biggest maker of generic drugs. Any financial problems could impact the Pharmaceutical Benefits Scheme, a key part of the country’s health care regime.

Nicholls is chair of Sigma’s risk management and audit committee, perhaps the most important board committee, one that would have vetted the accounts each year and one where the current changes would be handled, before being taken to the full board for approval. It will not be a good look for Fairfax Media for one of its new directors to have on her CV a massive loss at one of her long-time boards, where she played a key role in supervising its finances.

With huge asset write-downs (mostly goodwill and trademarks) coming, questions will be asked about the value of these assets in previous accounts and why the crisis erupted now. As well, how long did the company know about these problems?

The company’s shares have been suspended since February 25 while it sorts out its finances, amid warnings of material write-downs and asset impairment losses. While these will be non-cash, they  have a very real cash-like  impact on the company’s strength.

It has about $300 in a debt facility with the Big Four banks, and another $600 million in debt — plus goodwill of $960 million and trademarks of about $200 million. Its market cap is $1.01 billion based on the 90 cent a share price the day before the shares were suspended last month.

Now it’s talking to its banks about the facility and its renegotiation. A cash issue to raise new capital will be needed and watch out for management and board changes. Sydney fund manager Maple Abbott Brown (a shareholder in Fairfax) is Sigma’s biggest shareholder.

Nicholls’ problem is that she has been a director of Sigma since 2005 (when it became Sigma Pharmaceuticals). And she was a director of its predecessor, Sigma Company, from 1997. In other words she may be a director and independent, but she has been there for long enough to know some history.

Seeing the company was first suspended on February 25 at its request because of problems, the further delay is not a good look. There must be some very significant problems to be sorted out and negotiations held with its banks and other financiers.

Just before midday, Sigma released a statement postponing the release opf its 2009 results and other details by up to a week.

“The board of Sigma Pharmaceuticals Limited advises that more time than expected is required to finalise the year-end 2010 accounts.

“Accordingly, the accounts will not be finalised by tomorrow, March 23, 2010, the originally scheduled date for the release of Sigma’s full-year results.

“The results for the year ending January 31, 2010 will be made public on or before  March 31, 2010.”

Nicholls is also chair of Healthscope, another health care group — but in the private hospitals area  — with ambitions in aged care. It upset its major shareholders last month when it tried to buy an aged-care operator. Healthscope was forced to call off the $200 million deal, with some loss of face. Healthscope still wants to get into aged care and says it has applied to the federal government for 2000 beds.

Healthcare analysts point out that aged care is as tightly regulated as hospitals, with profits and good returns on assets hard to achieve. Aged-care homes are as much a property play as a form of health care. The company’s decision last month to abandon the aged-care deal came after reports of shareholder opposition.

Sigma will face that sort of reaction from shareholders when they reveal the bad news tomorrow. It’s not the best of ways to start a gig on a high-profile board such as Fairfax Media.