Western Australian Engineering Turnaround Success

Our client

Our client was a mid tier engineering and manufacturing company that delivered specialised services to Australia's largest mining companies. The business had been profitable but was hard hit by the downturn in the mining sector. The business was also poorly structured.

Their ambition

Our client's ambition was to reduce his exposure whilst, so far as possible, maximising the return to employees and creditors. His ambition was complicated by the position of the Australian Taxation Office as the second largest creditor, a substantial related party debt and an unsustainable cash flow.

We implemented a strategy that delivered a fair outcome for all creditors and minimised the director's liability whilst ensuring the ongoing operation of the profitable elements of the business.

Enhancing their success

We successfully delivered a strategy that paid down the secured debt, reduced liabilities owing to employees and generated a timely and fair return to unsecured creditors whilst saving key elements of the business.

Behind the headlines

Part of the business was initially sold off via an asset sale to a third party. This had the dual effect of reducing exposure to an institutional secured creditor and paying employees entitlements. The company was then placed into administration and a deed of company arrangement proposed.

The proposal was to deliver a return to unsecured creditors substantially in excess of the return they would receive on a winding up, with payment being made immediately. The proposal was accepted.

Importantly, the deed of company arrangement saved a key certification of the business which (post administration) would allow it to rebuild, utilise tax losses and continue to earn income.

An additional benefit was that a substantial portion of a related party debt was paid without compromising the return which unrelated unsecured creditors received.

The successful outcome was underpinned by the ability of the company's director to identify issues of insolvency and act upon them early. The administration and deed of company arrangement limited the director's exposure to contingent liabilities inevitably associated with corporate insolvency.

Senior lawyers involved in the matter

John Hutchings - Chairman and Head of Corporate & Commercial

Nick Amore - Senior Associate, Corporate & Commercial