As you are aware the second creditors committee meeting was held on 17 December 2008 and creditors approved proposals for deeds of company arrangement (DOCA) for each of Octaviar Limited (OCV) and Octaviar Administration Pty Limited (OA). OPI Pacific Finance Limited (PAC) voted in favour of both these DOCAs.
On 18 December 2008, the Supreme Court of Queensland ordered that the Public Trustee of Queensland’s (PTQ) application for the winding up of OCV be adjourned to 6 March 2009. The purpose of the adjournment was to allow PTQ to make an application to the Court to terminate the DOCAs approved by creditors. The PTQ is determined to see OCV and OCVA placed into liquidation because it believes liquidation will achieve a better return for its investors.
Over the Christmas period the terms of the DOCAs for OCV and OA were finalised. On 23 January 2009 the PTQ filed its application in Court to set aside the DOCAs. The PTQ’s application essentially had two limbs:
1. that the charge held by Fortress Credit Corporation, the only secured creditor of OCV, was invalid and thus the basis for the DOCA’s was invalid; and / or;
2. that the amount that several creditors, including PAC, were admitted to vote for at the creditors committee meeting was incorrect.
Ultimately, the Court decided to only hear the application with respect to the validity of the Fortress charge, and the hearing of the other matters was adjourned. The hearing took place on Monday and Tuesday this week, and judgement was handed down today. The decision of the Judge was that the Fortress charge was void, essentially because Fortress failed to file a document with the Australian Investment and Securities Commission (ASIC) when it should have.
This decision does not however mean that the DOCAs have been set aside or that Octaviar is now in liquidation. A hearing has now been set down for 5 to 11 May 2009 for the Judge to consider whether the DOCAs should be set aside and whether Octaviar should be liquidated. The PTQ has to file their evidence and outline of argument in this regard by 3 April 2009, and we will all reappear in Court again on 7 April for a directions hearing. In order for the DOCA’s to be set aside, the Judge will have to be convinced by the PTQ that the creditors were (1) mislead because the Administrators report assumed that Fortress’ charge was valid, and (2) that the DOCAs are prejudicial to creditors. For its part PAC will be appearing in Court and arguing, together with the other major creditors, that the DOCAs should remain in place.
In the period between now and the 5 May hearing, we expect Fortress to appeal the Judge’s decision to the Court of Appeal and also take steps to remedy their ASIC filing defect.
Unfortunately, the Court cases in relation to Octaviar look like they will drag on for some time before they are resolved in any meaningful way. But for the time being the status quo remains and Octaviar continues to operate under the DOCAs.
We had hoped to see a distribution flow to PAC out of Octaviar’s cash fairly quickly after the DOCAs were signed; however the PTQ’s applications have put a stop to that, and no distribution of cash will occur until all of the Court proceedings are finalised.
The next PAC distribution to investors is not due until the end of March, and PAC have indicated that they will not know until much closer to the end of the month what amount it would be (if any).
- OCV Deed of Company Arrangement as proposed by Fortress
- OA Deed of Company Arrangement as proposed by Fortress
- OIN* Administration end and control be returned to the directors
- OIB* Administration end and control be returned to the directors
What will OPI Pacific (PAC) stockholders receive out of the Fortress DOCA?
Next Steps
December Distribution
OPI Pacific has made a distribution of the sum of AUD$3 million to Secured Debenture Stockholders on 22 December 2008. This payment represents an amount of 1.4cents per dollar of principal outstanding to Secured Debenture Stockholders as at the commencement of the Moratorium, and brings the total amount repaid to date to 21.16cents / $1.
OPI Pacific has stated that further distributions will take place in the future as additional loan recoveries are made, and as any proceeds become available to creditors through the DOCA.
Administrators
The Administrators of Octaviar are nearing the end of their process of assessing the Octaviar Group, creditor’s claims, and the options available to creditors. We expect to receive the Administrator’s report within the next fortnight.
For our part, PAC has had a number of meetings with the Administrators and provided them with detailed information in relation to each of PAC’s loans and investments, and particulars of our claims against:-
1. Octaviar Limited (Administrators and Receivers Appointed) in relation to the Put Option; and,
2. Octaviar Administration Pty Ltd (Administrators Appointed) in relation to our allegations of negligence and breaches of the Management Agreement with that company.
Yesterday we received a further set of queries from the Administrators and we are in the process of addressing those. Thereafter we expect the Administrators to advise us of their views in relation to PAC’s claims, and the quantum that they will admit PAC for. If we are not happy with their assessment of our claims then there are legal avenues open to PAC to challenge it.
Deed of Company Arrangement
Octaviar has presented a draft Deed of Company Arrangement (DOCA) to the creditors which they say will produce a better outcome for creditors than liquidation. The terms of that DOCA are incomplete and confidential, and as such I’m unfortunately not permitted to go into any detail about them.
There have been two meetings of the Creditors Committee to consider and discuss the DOCA, and the creditors have provided feedback on it to Octaviar and the Administrators.
Octaviar is now working to finalise their DOCA proposal in time for the mid-December creditors committee meeting that will decide Octaviar’s future.
December Distribution
We are currently considering the ability of PAC to make a further distribution for the December quarter from available cash. We can’t yet confirm whether a distribution can be made as we still need to complete our cashflow forecasting. If and to the extent a distribution is possible it will be in vicinity of 1c/$1 to secured debenture stockholders.
Liquidation of OPI New Zealand Limited
You may have noticed that OPI New Zealand Limited (OPI NZ), the ultimate parent of PAC, was recently placed into liquidation. Please note that this event, or any future liquidation of the subsidiaries of OPI NZ, will have no effect on OPI Pacific Finance Limited or its moratorium.
- Will the moratorium for OPI Pacific continue?
- end the Voluntary Administration and return Octaviar to the directors’ control;
- approve a Deed of Company Arrangement; or
A further complication occurred on Monday 15 September, when a Receiver and Manager was also appointed to Octaviar by Fortress Credit Corporation (“Fortress’). We understand that this appointment relates to certain guarantees given by Octaviar to Fortress. At this stage Fortress has not indicated an intention to appoint a Receiver to OPI Pacific Investments Pty Ltd.
In regard to the effect of the above on the OPI Pacific moratorium we have been given the following statements:
- OPI Pacific are currently working with the Trustee and advisors in relation to the potential impact the events with Octaviar in
- They will also be working with the Voluntary Administrator in relation to the claim under the Put Option and OPI’s rights as a creditor of Octaviar.
- The stated objective is to continue to negotiate an arrangement with Octaviar (through the Voluntary Administrator) that will deliver a repayment proposal that is consistent with the recent directions of Stockholders, and that will produce a better outcome than a liquidation of Octaviar.
- What is the current assessment of the OPI Pacific loan book?
- Will the proposed payment for September 08 to Secured Debenture Stockholders still go ahead?
- What prior charges are in place against OPI Pacific that are ahead of Secured and Unsecured Debenture Holders?
- Will the Cash Offer proceed?
- Are investors in OPI Pacific able to amend their decision on the Cash Offer made by Octaviar?
- Will the moratorium for OPI Pacific continue?
Please note that the deadline for return of the Proxy Forms regarding the vote on the Secured Debt Arrangement remains unchanged and Proxy Forms must be returned as directed by 10am on 6 September 2008.
Notice of Meeting and Explanatory Memorandum - 8 September 2008
The first decision relates to the “Notice of Meeting and Explanatory Memorandum” documentation. The purpose of the meeting is to seek approval from OPI Pacific Finance stock holders to enable the company to enter into a Secured Debt Arrangement with Octaviar.
If the Secured Debt Arrangement is approved it will allow Octaviar to put forward a Cash Consideration Offer to Secured Debenture Stockholders and Unsecured Note Holders.
If the Secured Debt Arrangement is not approved the likely outcome for OPI Pacific and Octaviar Limited is liquidation.
There is an individualised proxy form which will be enclosed in your pack which you need to use to vote. For the vote to succeed 50% of holders must vote and 75% of those who vote must vote in favour of the resolution. If you are not attending the meeting then please return your vote in the prepaid envelope enclosed in your pack before 6 September 2008. If you do not meet this deadline your vote will not be counted.
Octaviar Limited Cash Offer to Acquire Secured Debenture Stock and Unsecured Notes in OPI Pacific Finance
The second decision involves Octaviar Limited putting forward a proposal to investors whereby they can either:
The cash offer can only proceed if the Secured Debt Arrangement is approved. However due to the timeline imposed by Octaviar Limited you must make your decision now. To assist you in assessing the possible outcomes of these two later courses of action we draw your attention to the table on page 23 of the Octaviar Cash offer document which sets out possible outcomes for Secured Debenture Stockholders and Unsecured Note Holders under various scenarios.
Please read your Acceptance Form(s) carefully. If you have both unsecured and secured stock or NZD and AUD stock you will have separate Acceptance Forms for each. The information on the top right of each Acceptance Form will indicate which investment the Form relates to.
When deciding whether to accept or decline the Cash Offer please consider:
- You have the option to accept the Cash Offer in full or in part for each investment you hold.
- If you have more than one investment you can accept the Cash Offer for one and decline it for another.
The cash offer is for 22.50% of the Net Face Value of Secured Debenture Stock and 15% of the Net Face Value of Unsecured Notes.
Summary
If OPI Pacific Secured Debenture Stockholders and Unsecured Note Holders and the other large creditor groups of Octaviar do not approve the Secured Debt Arrangement at their respective meetings, it is probable that Octaviar will be placed in liquidation due to the company’s current poor financial position.
Secured Debenture Stockholders and Unsecured Note Holders have two decisions to make.
First either accept or reject the Secured Debt Arrangement using the Proxy Form enclosed. If this is approved then your second decision is to:
GWM's recommendation to clients is that you vote in favourof the Secured Debt Arrangement. This will allow Octaviar to present you with the Cash Offer and continue to seek the best return on the remaining assets of the group.
We do not make any general recommendation in regard to merits of the Cash Offer from Octaviar Limited. This is because it will depend on the personal situation of you as an individual and because there are too many different scenarios for us to make a general recommendation. Please consult your adviser if you would like to discuss your own position.
We are attempting to get further information but at this stage have no more access than the general public. As unpalatable as it may be, the immediate benefit of the moratorium is that Debenture Stockholders have been paid some capital already, something that would not have happened in a receivership.
Another common question has been when interest will be paid under the moratorium. To clarify, no interest payments will be made until all capital is paid back to both secured and unsecured creditors.