08 Aug 2019

CU LAB: Australian restructuring – looks a little American?

Recent Australian restructures suggest we're moving closer to the US approach of looking at underlying match of the economic model and the underlying match of the business operating environment in which the company is to operate.

Related Knowledge

Get in Touch

Get in touch information is loading


Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.


In October 2013 Quintis limited with 13,000 hectares of sandalwood under cultivation successfully restructured using a combination of deed of company arrangement, scheme of arrangement and a chapter 13 filing to United States. In many ways, Quintis was a natural extension of filings and restructures by Australian Companies Ten Network, Paladin, Atlas, Arrium, Bis, Emeco, there are a number of companies which fit that space.

The important aspect to remark upon at this point in time is that Australian restructures are preserving businesses, are keeping tax revenues and maintaining the business in the operating community through a combination of debt composition, maintenance reset, obligation reset, maintaining a economy match between the companies abilities and the situation that it finds itself in now and the situation it may find itself in the future.

What we are tending to find, as the Australian market restructures, is we are moving closer and closer to a United States model of looking at the underlying matching of the economic model with the underlying match of the business operating environment in which the company is to operate, and this is where Quintis came in. It accepted new capital from Blackrock, which was an international capital provider already locked into the capital structure of Quintis, with looking to protect its capital but contribute further capital to the continuation of the business.

There are a number of trade creditors and other creditors who could reset their timelines for payment and so they reset on a temporal basis, when they were to be paid and deferred their rights until certain economic benefits were achieved. Within the company itself, there were a number of growers who simply wanted to maintain the plots to cultivation and improve their chances of taking off an economic cultivation of sandalwood in due course, and they were also driven by tax considerations so their timing model was perhaps different to the timing model of some of the trade creditors and the timing model of employees, the timing models of those who were contributing services to the trees, growing them to cultivation and of course changing the timing model of sophisticated capital providers such as Blackrock.

What we are seeing within these restructures is that increasingly companies are turning to informal negotiations, pre-administration, pre-restructure through schemes of arrangement so that the number of counterparties are on the same page in terms of understanding what they are going to achieve over the longer term.

Quintis is a great example of a restructure, pre-planned, utilising the Australian creditor-driven process in a way which is debtor and market friendly. The only question we are left with is 13,000 hectares of sandalwood, what are we going to do with the stuff?