Synopsis
The Company, Trustee of a Unit Trust that owned 8,500 m2 shopping centre in Regional NSW, could not meet its interest payments and loan amortisation i.e. it was insolvent. Loan to valuation ratio (LVR) exceeded 90% and the appointment of a Receiver by the bank was imminent. A Receiver’s principal role is to realise the Company’s property to repay the secured creditor.
Two pieces of litigation between individuals (also unitholders), and the Company were underway.
Consequently, the director appointed Alan Hayes as Voluntary Administrator of the trustee Company.
Our work included
- An immediate review of the business, its financial circumstances and viability;
- A trading performance forecast
- Meeting with the secured creditor to discuss strategies to provide comfort on its security position
- Trading on the business and commencing a search for new tenants
- Meeting the litigating parties
- Notifying and meeting with creditors
Our work revealed the following issues prevailing
- Two separate pieces of litigation between individuals (also Unitholders) adversely affected funding of the Unit Trust and their communication
- Loss of tenancies, including one which accounted for 20% of the retail floor space.
- Cash flow deficiency of $25K per month, before loan amortisation of $300K p.a, payable quarterly
- Capital calls to fund the cash flow deficiency were not met by 69% of Unitholders
Hayes Advisory’s philosophy is to provide solutions to benefit all stakeholders, accordingly we:
- Provided the litigating Unitholders with information (on a confidential basis) to enable communication, mediation and ultimately, a resolution
- Met with the two litigating unitholders to find a commercial resolution through mediation
- Provided timely updates to the secured creditor on the status of the Administration
- Maintained trading
Outcome
The “settlement discussions” chaired by Alan Hayes resulted in a resolution that allowed a Deed of Company Arrangement through which;
- The constituent documents of the Company and the relevant Unit Trust Deeds were restructured for the benefit of all stakeholders
- All litigation was settled
- A Capital raising by which:
– All trade unsecured creditors were paid in full
– The secured creditor was repaid in full
– A new secured creditor financed the Trust at a significantly reduced debt level, and interest rate supportable by trading
- The business’ profitability returned and Unitholders’ value resurrected
Our pragmatic, inclusive and commercial approach enabled identification of the pertinent issues, beneficial communication and enabled optimal outcomes for all stakeholders. Plus, expensive litigation, the appointment of a Receiver and the need for the Court’s intervention were all avoided.
Team Alan Hayes and Matthew Nguyen
Year 2016
Period 3 Months
