30/01/2018 - 06:44

Asic blocks Quintis growers’ plan

30/01/2018 - 06:44

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Quintis investors hoping to appoint a new ‘responsible entity’ to have oversight of their sandalwood project will need to change plans after the corporate regulator said their two preferred entities were not eligible to take the role.

Asic blocks Quintis growers’ plan

Quintis investors hoping to appoint a new ‘responsible entity’ to have oversight of their sandalwood project will need to change plans after the corporate regulator said their two preferred entities were not eligible to take the role.

The Australian Securities and Investments Commission wrote to Sandalwood Growers Cooperative chairman Teague Czislowski last week advising that Sydney-based Huntley Management and the co-op itself were not authorised to become the RE for Quintis schemes.

Asic’s advice could open the door for Fremantle-based Primary Securities, which is writing to growers in all Quintis schemes outlining its credentials as an alternative RE.  

Quintis investors are due to meet at Dalkeith Hall this morning, to vote on a plan to replace Quintis subsidiary Sandalwood Properties as the RE for the 2002 sandalwood scheme.

McGrathNicol, which took charge of Quintis last week after being appointed receivers by the company’s secured creditors, has told growers that changing the RE would be a risky move.

It has stated that a new RE may remove the ability for investors to defer their lease and management fees, and that Quintis Forestry may no longer look after the 13,000 hectares of sandalwood plantations owned by investors and institutions.

“To the extent that a Quintis entity is no longer the responsible entity of your managed investment scheme, there is no guarantee that the plantation management services will continue to be performed,” McGrathNicol said in an FAQ posted on the Quintis web site.  

The receivers said Quintis was continuing to work in the best interest of investors to maximise their return on investment.

Quintis believes it is best placed to carry out both the responsible entity and plantation management roles in relation to your investment, particularly given its extensive experience in the industry, its ownership of critical infrastructure and water rights and its collective ability to market and sell product,” the FAQ stated.

The reassurances from McGrathNicol are unlikely to satisfy angry investors who are highly critical of the manner in which Quintis and its former directors managed the group, particularly the 2002 scheme tender.

Despite their anger and desire for change, the advice from Asic is likely to stymie the co-op’s plan for a new RE.

In a letter dated January 25, Asic senior manager Paul Eastment told Mr Czislowski that an RE must be a public company with an Australian financial services (AFS) licence and the relevant authorisation to operate a scheme.

“Huntley currently does not have the necessary authorisation given that their current AFS licence is restricted to named schemes only and the project is not named on their AFS licence,” the letter stated.

Mr Eastment stressed that a company must have the relevant authorisation before it can be chosen as an RE.

“I note that the explanatory memorandum to the notice of meeting presents Huntley as appropriately authorised to become the replacement responsible entity, when in fact it is not,” Mr Eastment said.

The Asic letter reveals Huntley was trying to rectify the regulatory problem last week, as it wrote to the regulator on January 24 applying for a variation of its AFS licence.

“For completeness, we note that you have previously proposed the co-operative, SGC, as a replacement responsible entity,” Mr Eastment’s letter added.

He said SGC was not eligible to be chosen as it was not a public company, not does it hold an AFS licence.

Mr Eastment said Asic was not opposed to growers taking action to replace Sandalwood Properties as the RE, it just wanted to make sure the replacement RE had the appropriate regulatory approvals.

In a nine-page letter sent to growers, Primary Securities has mapped out a detailed case for why it should be appointed RE.

“When the RE of a scheme is in receivership, MIS investors need to change the RE to protect their interests,” Primary managing director Rob Garton Smith said.

“Primary considers that it is the most eligible professional RE in Australia for this role and has the required reputation, and track record to maximise outcomes for Growers and the schemes."

Mr Garton Smith has urged investors to ignore the co-op.

“Picking a fight with the administrators, receivers and noteholders involves unnecessary risks and costs for growers,” he said.

Mr Garton Smith believes both the Quintis RE and the co-op have conflicts of interest, and asserts the co-op is controlled by or heavily influenced by Quintis founder Frank Wilson, who is one of three co-op directors and a major critic of his former company.

“In general, Primary is concerned about former executives of insolvent forestry MIS companies looking to take control of the schemes they formed,” he said.

“They usually have high personal and commercial interests, including loans and other obligations. This is another conflict that has to be resolved.”

Mr Garton Smith said Primary would continue to use Quintis entities to manage the plantations if it was appointed as the RE.

 

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