Security Restructuring and Workout

Background

Our clients had invested in an ASX listed company and had obtained extremely poor security having regard to the quantum of their investment and the importance of that investment to the borrower.

The borrower had continually communicated “blue sky” news to our client but, on any objective measure, had spectacularly failed to deliver any value for shareholders and had pinned the company’s commercial future on the success of the company’s own investments (funded by our client) into private companies hoping to successfully list projects on the Australian Securities Exchange.

Strategy and Solution

We met with the borrower’s Chairman and CEO to gain an understanding of their position and quickly established a baseline position.

Recognising that the borrower’s Board were highly cognisant of their company’s fragility, we then co-operated with them to set timelines for an exit strategy for our client, together with a series of actions that would avoid the need for a formal insolvency appointment that would have severely damaged the company’s share price and future prospects of success.

We engaged with one of Sydney’s leading boutique law firms to prepare a bespoke Deed of Compromise and Release within 18 hours of the initial brief and, two days later, had an executed agreement that involved an immediate transfer of listed shares, a supervisory Board appointment and a clear timeline and process to be followed for the balance of payments due, together with a “drop dead” provision that included both a hard deadline and a “no contest” clause in the event of the borrower’s failure to settle.

Outcome

Notwithstanding that the borrower’s Board exhibited a number of behaviours that could only be interpreted as bizarre and resulted in Supreme Court action, our strategy achieved a full return of our client’s principal, together with all interest due and a generous allowance for costs.

The borrower obtained financial support from a friendly investor and the company retained its listed status without lasting damage.