Australia’s first guarantor scheme illustrates expanding restructuring possibilities
King & Wood Mallesons (KWM) has advised Tiger Resources Limited (Tiger) on the restructuring of its secured debt facilities using the guarantor scheme which was implemented on 11 June 2020.
Firms: King & Wood Mallesons (Tiger Resources).
Deal: KWM advised on the restructuring which used an Australian creditors’ scheme of arrangement (“scheme”).
The scheme meeting was convened on 23 December 2019 and the scheme was approved by the Federal Court of Australia on 21 February 2020.
Area: Restructuring and M&A.
Key players: A combined restructuring and M&A team advised Tiger, led by national head of restructuring Tim Klineberg and M&A partner Daniel Natale with support from senior associates Mark Vanderneut and Andrew Vincent and solicitor Jeremy Yam.
Deal significance: Tiger is the first guarantor of secured debt borrowed to successfully compromise the debt and its guarantees using an Australian scheme.
The scheme also successfully varied the English law governed financing documents, applying principles previously used to vary New York law governed agreements.
Those outcomes were achieved despite a spirited challenge by the minority secured creditor, International Finance Corporation (IFC) including a contested hearing before Justice Murray Gleeson of the Federal Court of Australia.
“This transaction has been highly significant and is a strong example of the Australian courts demonstrating their willingness to support novel scheme structures and move swiftly when a company’s solvency position requires urgency,” Mr Klineberg said.
According to KWM, Tiger’s scheme has implemented a comprehensive restructuring of the secured facilities combined with achieving Tiger’s other objectives, including:
- delisting from the ASX
- a change of majority ownership
- a cleaner balance sheet to support potential further investment in its Kipoi copper project in the Democratic Republic of Congo (DRC).
“The approval of the novel Tiger scheme has further expanded the scope of the Australian creditors’ scheme as a procedure to restructure cross-border debt,” Mr Klineberg said.
“Schemes are particularly important in Australia since we do not have other debtor-controlled restructuring procedures like the US [chapter] 11 or the English company voluntary arrangement. Tiger’s outcome shows what is possible using Australian creditors’ schemes”.
Mr Natale said that schemes are an important part of the toolkit for companies, and their lenders, that are looking to cut their debt burden whilst achieving other objectives including changing shareholder profiles and governance structures.
“We expect these types of transactions to become more common through 2020 as COVID-related reforms roll off,” he said.