Creditors of contractor Brandrill have agreed to a deed of company arrangement that will allow the failed drilling company to be restructured and potentially re-listed on the Australian Stock Exchange by next April
The DOCA agreement came after a creditors’ meeting in which three different deeds came under discussion.
Under the agreed deed, proposed by Brandrill’s directors, London-based investment bank Mizhuo International – a subsidiary of the Japanese Mizhuo Financial Group – will provide no less than $4.5 million in a new equity raising to get the drill contractor re-listed on the Australian Stock Exchange.
In return, Mizhuo will own about 70 per cent of Brandrill. Mizhuo already bought Brandrill’s $4.8 million Commonwealth Bank debt.
Brandrill administrator Tony Douglas-Brown, of accounting firm Bentleys MRI Perth, said that with the DOCA in place, the company could be back on the ASX by next April.
Before the meeting Brandrill’s creditors were expecting to decide between a DOCA proposed by the company’s directors or to liquidate the business.
However, two 11th-hour DOCA proposals were put to creditors, the first from the company’s main competitor Ausdrill and then a renewed DOCA from Brandrill’s directors. For unsecured creditors it was a choice between 10.6 cents in the dollar for either the old or the new Brandrill deed or 11.5 cents in the dollar if the Ausdrill option was chosen. If liquidation had been chosen their dividend fell to about 6 cents in the dollar.
Pitcher Partners’ Vincent Smith made an impassioned plea for support of the Ausdrill DOCA proposal, which also required a 14-day adjournment of the creditors’ meeting to allow the company to put a more detailed proposal to creditors.
Mr Smith said Ausdrill had been attempting to buy Brandrill’s bank debt and had only recently found out that the debt had been bought by Mizhuo, hence the lateness of the company’s proposal.
“Ausdrill has $10 million in cash ready to fund its proposal,” he said.
“This other proposal is being put forward by people who presided over the fall of the company and its incurrence of more than $40 million in debt.”
Brandrill director Ken Perry made an equally impassioned plea for the support of the DOCA proposed by the company’s directors, questioning the motives of Ausdrill.
“Ausdrill has seven conditions [attached to its DOCA] and there is nothing to suggest they will complete those conditions,” he said.
The directors’ DOCA was also supported by Brandrill receiver Martin Jones of insolvency firm Ferrier Hodgson, which now represents Mizhuo.
He said Mizhuo had a commitment to Brandrill coming out of administration but also warned that Mizhuo would walk away from the deal if creditors backed Ausdrill’s adjournment call.
When the vote counting was done, 129 creditors representing $16.8 million voted against accepting Ausdrill’s adjournment. Only eight creditors, representing $12.7 million voted for it.
Major creditors Industrial Development Corporation of South Africa had agreed to back either DOCA proposal, the Lim Asia Arbitage Fund and RBC Trustees have agreed to convert their debt to equity. Brandrill was placed into administration on June 23.