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Quintis recapitalization and report to creditors

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McGrathNicol Partners Jason Preston, Shaun Fraser and Robert Brauer, who were appointed Receivers and Managers of Quintis Ltd and a number of its subsidiaries in January 2018, have provided an update on the recapitalization of the companies. Source: Timberbiz, ABC News

The creditors voted for the Receivers’ proposed Deed of Company Arrangement (“DOCA”) which the company says represents another important step in seeing the business emerge as a private company in a very strong financial position and well placed to continue its strategy as a world leading marketer, producer and seller of sandalwood timber, oil and products.

According to Quintis the creditor vote is an endorsement of the strategy to recapitalise the companies with between A$125 million and A$175 million in new cash to be injected into the business to fund operations on a long-term basis and acknowledges that the DOCA represented the best path forward for all creditors, including employees and growers.

Quintis’s administrators Kordamentha released a report to creditors, which flags a number of potential offences by the company’s current and past directors, including potential insider trading by founder and former chief executive Frank Wilson.

The report raised questions over the timing of 50,000 shares bought by Wilson’s family company, the same day he was expecting a takeover proposal from a Chinese private equity fund.

Mr Wilson said he was disappointed administrators had not approached him before publishing the report and strongly rejected any claims of wrongdoing.

“The chairman of the company got advice that one of the best things in a situation of an attack by a short-seller is for directors to show their support for the company by buying shares in the company,” he said.

“I had 48.8 million shares at the time. I didn’t need another 50,000 to go into some sort of profit-making scheme. I clearly did it to support the stock.

I did it on advice of the company’s advisers at that time. I did it with the knowledge of the chairman and I’ve lost all my money.

“So, if someone thinks this is an insider trading scheme, then I know I’m of Irish background but you could make an Irish joke out of it.”

Frank Wilson shocked many when he resigned as the boss of Quintis last March, following a scathing report by an American short-seller alleging Quintis’s business model was like a Ponzi scheme, and claiming the company’s biggest customer in China was no longer buying timber.

Mr Wilson has always rejected the Ponzi scheme allegation.

Since then, he has said he watched on in horror as the company he founded slid into a nine-month trading halt and dropped more than $US400 million in value before going into voluntary administration in January.

“I accept total responsibility for anything that I have been involved in myself [but] the failure of Quintis is very simple,” Mr Wilson said.

He said Quintis failed because it could not sell any plantations in the June quarter, something that had not happened for 20 years.

“I offered my services to Quintis to help them sell plantations, to sell product. They said, ‘No, we can do it better without you Frank’.

“I’m very much looking forward to the facts surrounding the collapse of Quintis to be brought out into the public.”

There has been no love lost between Wilson and what he has described as the “inept” members of the Quintis board, who he is currently suing for defamation.

Wilson has this week also expressed his intention to sue his former co-directors over a contract termination and is himself fighting legal action in one of three separate class actions against Quintis in the Federal Court.

In yet another twist in this extraordinary case, receivers from McGrathNichol announced global investment giant Blackrock had put forward a multi-million-dollar proposal to rescue Quintis and the jobs of its 222 staff across northern Australia.

McGrathNichol confirmed the company’s largest bondholder Blackrock proposed a plan that would see $175 million injected into Quintis to start afresh as a private company.

“Growers will retain the right to defer all lease and management costs throughout the life of their projects and their trees will continue to be maintained by Quintis’s experienced team of sandalwood forestry experts,” McGrathNichol said.

“The Quintis responsible entity will be well-funded and therefore the vehicle best placed to protect grower interests.”

The proposal will go to a vote of creditors on June 8, and if approved it is likely that the recapitalisation would be completed by the end of August.

Sandalwood growers in Kununurra view the recapitalisation plan as both good and bad.

“I’ve got shares in Quintis, and they’re probably going to be worth next to nothing, which is not much fun for those who have shares,” said Sandalwood Sanctuary owner Paul Mock.

“But I’m a creditor as well, so hopefully we’ll get some money back from what’s owed to us. I’m not sure what percentage that’s likely to be.

“In terms of leasing land to them [Quintis], I think it’s a good thing … [it] looks like they’re going to continue to look after the plantations.

“Growers will support people who have a plan and can pay the leases [on an] ongoing basis.

We’re not going to put our hat in the ring for a particular person or company, it’s just whoever can give that stability and look to the future. That’s the sort of thing we’re looking for.”

Mr Wilson, who is also Quintis’s largest shareholder, said “there was nothing in this deal for shareholders” and claimed everyday Australian investors would be left with nothing if Quintis was de-listed and reformed as a private company.