RESTRUCTURING FOR CROSS-TASMAN SUCCESS

About the panel

The Panel also included Australian Restructuring Lawyer Orla McCoy, New Zealand Restructuring Lawyer Scott Abel and Australian Safe Harbour Advisor Joe Hayes, and was chaired by New Zealand Restructuring Lawyer Josh Cairns.  

The group developed a case study about a business facing a gradual, then sudden crisis facing a listed company in Australia, with a NZ subsidiary, a Bank syndicate and other lenders and stakeholders. 

The Hypothetical 

The session focussed on a comparative analysis of New Zealand’s wrongful trading regime and Australia’s insolvent trading laws, with practical strategies to assist directors to steer financially distressed businesses through turnaround scenarios. The facts included:

• A listed Australian listed entity, that acquired a NZ based business;
• The business increased its leverage for growth, supported by solid earnings and shareholder support via several capital raises, 
• Lending was provided by a syndicate of Banks including three Australian Lenders, three foreign Lenders.  and a NZ based asset lender not aligned to the Syndicate.
• Whilst earnings were solid, analyst reports were weakening and equity support was drifting;
• An equity fund took a strategic stake, resulting in a new director with a different outlook and background joining the Board; 
• A significant disruption occurred, resulting in a sudden change in Government regulation meant the business could not service clients; 
• Company undertook an immediate and urgent business and forecast review; 
• There was significant earnings and staff disruption, and a New Zealand knock on effect;
• Share trading was suspended, with emerging going concern issues and an urgent need for a capital placement;
• Lenders required reporting on covenant compliance and amortisation plans.

Key issues considered

• The issues as between Australian Safe Harbour and the issues facing New Zealand directors in relation to the duties;
• The discussions expected with the directors as the Company seeks to navigate these challenges;
• Director liability and reputations as directors in each jurisdiction;
• What is a Course of Action and a Better Outcome;
• The extent of a Safe Harbour mandate and cross border reliance on the Australian regime;
• The impact of the recent New Zealand cases on Directors duties;
• The interaction between the Company and Bank Advisors ;
• The issues facing the New Zealand Directors and business and Relevant Liability Letters that might protect the NZ Directors from reckless trading.
• The enduring obligations of restructuring advisors;

Conclusions: 

The Panel determined that Australian Law provided a sound basis for balanced restructuring, and the recent New Zealand cases (Mainzeal/Debut) were instrumental in raising the profile of cross border restructuring and the need to develop a more legitimate restructuring protocol.  The Mainzeal case affirms the Supreme Court’s finding in Debut Homes, that it will be a breach for directors to continue trading a company where there is a risk of loss to creditors, even where trading on for a period could improve the position for some of the existing credit.  This is an interesting counterbalance to the Safe Harbour regime in Australia, where the concept of a ‘Better Outcome’ is yet to be tested.

It is clear these matters are gaining increased exposure, as the New Zealand cases require a very structured and detailed approach to the payment of future debts.

Panel Bios

Josh Cairns 

Josh leads Simpson Grierson Wellington's banking and finance national practice group. He advises on both corporate finance transactions and corporate restructuring and insolvency engagements. He acts for a range of financial institutions and corporates on financing transactions, and has a particular focus on the infrastructure sector. Based in Wellington, Josh also regularly acts for central and local government entities on complex projects and transactions.

Josh is Director of the Banking and Financial Services Law Association (BFSLA), and a member of the Restructuring, Insolvency & Turnaround Association of New Zealand (RITANZ). 

Orla McCoy

Orla is a partner and Co-Head of our Restructuring + Insolvency practice and a fellow of INSOL International. She has over 20 years of local and international experience, and has acted on some of the largest insolvency, distressed workout, and debt restructuring matters in Australia. Orla is widely regarded as one of the leading practitioners in her field. Clients, including corporates, insolvency practitioners, the Commonwealth Government and financial creditors seek Orla’s expertise on both debtor and creditor-side corporate restructuring, formal insolvency appointment and Personal Property Securities Act related matters. Orla has acted on a number of Australia’s ground-breaking and legal-precedent setting engagements.

Scott Abel

Scott specialises in insolvency and debt restructuring, corporate and secured finance, and specialist personal property security and credit recovery advice. He advises and has acted for domestic and foreign banks, financial institutions, insolvency professionals and other organisations on receiverships, liquidations, administrations and workouts. 

He is particularly recognised by the market for his leading expertise in Personal Property Securities (PPS) law, often advising banks, insolvency practitioners and other firms and barristers on complex PPS matters.

Joe Hayes

Joe has over 25 years’ experience in the sector, including 13 as a Partner at KPMG and McGrathNicol, before forming Wexted Advisors on 1 July 2017. 

Joe is highly skilled working with and advising parties with diverse objectives or disputed positions to achieve best outcomes. Working closely with management, boards, lenders and owners, Joe has undertaken many large and complex restructuring and insolvency cases over a long period. He also has significant expertise in the supervision of complex litigation and the successful settlement of multi-party disputes and has given expert evidence in court proceedings.