Restructuring & Insolvency

Restructuring & Insolvency - Australia

Clients tell us that KWM’s insolvency lawyers understand their business in a way unlike other law firms. Our ability to meet their business needs through our full service strength in Australia, backed by our international reach have enabled us to be the commercial counsel on high profile and complex deals. Our ability to work collaboratively, operating with our international counter-parts has given us an extra edge in providing a seamless service to clients in real time, in today’s global business world.

Equipped with a team of high performing and dynamic practitioners we are known for our ability to navigate multi-faceted and fast moving distressed situations, with our energetic and experienced team advising on:

Restructuring and Distressed Investment

Today’s restructuring and distressed investment environment is complex, fast moving and dynamic. For clients facing into these situations there is no ‘one method’. Clients seek us out to develop solutions and implement them using flexible and creative methods.

To support our clients through these situations, our team has access to KWM’s specialist expertise and cross-jurisdictional reach to provide innovative solutions to complex distressed investment situations.

Insolvency Advice

We have a thorough understanding of the specific drivers and objectives that govern insolvency procedures. Our deep experience and expertise allows us to be creative in using insolvency procedures to achieve strategic outcomes for our clients.

We regularly act for creditors, insolvency practitioners, Government and many different types of stakeholders in major insolvency situations.

Insolvency Litigation

Complementing our restructuring and distressed investment practice, we continue to act in the most contentious corporate insolvency and administration situations in the market. Such matters frequently involve multifaceted litigation; complex issues requiring innovative solutions; and are conducted under the public and media microscope.

Our contentious insolvency practice is driven by outcomes – not procedures. Our insolvency litigation practitioners are known leaders in the field and are acknowledged for running novel arguments and developing innovative solutions to achieve the best results for clients.

Key matters include:

  • Akron Roads – advising the liquidators on the High Court proceedings
  • Arrium Group – advising the lenders on the administration and asset realisation process
  • Ausenco – advising Resource Capital Funds on its debt acquisition and takeover
  • Basslink restructuring – advising the secured lenders on the ongoing restructuring
  • Emeco/Orionstone merger – advising Orionstone on the restructuring completed by scheme of arrangement
  • Masters – advising Woolworths on its wind down of the Masters hardware chain
  • McAleese administration – advising the administrators on the recapitalisation
  • Paladin Energy Limited restructuring – advising the ASX-listed company on its ongoing restructuring
  • Peabody – advising Pembroke which acquired Australian coal assets
  • Quickflix – advising Karma Media Holdings which acquired the business out of administration
  • Queensland Nickel - advising the Department of Employment with respect to $74m of entitlements owed to hundreds of workers following the collapse of Queensland Nickel.
  • Slater & Gordon – advising Westpac as transactional lender.

Find out more about the Arrium administration in the video below.


Show transcriptHide transcript

What did the appointment of administrators mean for the business and the lenders?

Tim Klineberg: The appointment of the administrators came after a long period of pre-appointment attempts to restructure. Administration is a change of control so that you have got administrators stepping in, instead of the directors in charge of everything. In Arrium you had that happen twice. So you had the administrators come in - originally Grant Thornton, who were then replaced by KordaMentha - so you had two big changes of control.

What it really meant for everybody was, I think ultimately now because we’re at the end, we know that it enabled the businesses to be packaged up into their optimal way to be sold and sold off with the funds being transferred to the creditors. I think what you would see is, with Arrium, it wouldn't have really been possible for that to happen - that’s my personal view - in a pre-appointment scenario. I don’t think the directors had the same freedom to sell, that the administrators and the deed administrators have had in the administration procedure.

Would Australia’s new safe harbour reforms have helped Arrium’s restructuring strategy?

Tim Klineberg: I’m sure the Arrium directors would have loved to have had the safe harbour reforms in effect. It would have given them the comfort that they felt they were pursuing the right outcome for creditors and they were taking steps that would have led to a better outcome for creditors. They would have genuinely believed that as they were taking those steps.

Again though, I think in hindsight, we’d probably say that the plan they were adopting prior to the appointment, certainly from the lender’s side who we acted for, we would have said that plan was not the right plan and we didn’t think it would have ended in a better return for creditors. In fact, we may well say that the outcome, compared to the pre-appointment offer, was superior out of administration than it was for the pre-appointment proposal that was put. So it may well be, perversely, that the safe harbour wasn’t available to the directors, but we’ll never know the answer to that because the reforms are not in effect yet.

Why is Arrium a significant development in Australia’s administration and deed of company arrangement procedures?

Tim Klineberg: The deed of company arrangement put in place for Arrium is unprecedented in the Australian market, it’s a completely new frontier in Australian restructuring. It’s a very, very significant development and we were proud to have had a hand in it, but we also credit Arnold Bloch Leibler, and Leon Zwier in particular, for coming up to the structure.

The aggregation structure and the way that a complex corporate group was able to be reorganised and positioned then for sale created huge benefits for the creditors and for all stakeholders. I think the innovative way in which the deed of company arrangement was put to the court and the change in disclosure, it was just a completely new paradigm. It’s hard to overstate how important that was for the Australian market and I think we’ll see that structure again on big deals. It’s a structure certainly worth considering.

Can you outline Arrium’s pre-appointment financing structure for us?

Ken Astridge: At a high level: three large syndicated facility agreements, and then an assortment of bilateral facilities, receivables purchase facilities and hedging transactions - interestingly, broadly on the same terms and conditions, and what you would expect to see in the context of a large listed investment-grade borrower. The difficulty I think for the banks was that Arrium was rapidly ceasing to be investment-grade.

How important was the US$120m refinancing of the GSO facility to the MolyCop sale outcome?

Ken Astridge: So the importance of the refinance of the GSO facility was critical. Arrium had gone into administration, the administrators were desperate to create stability and then on the side you had GSO who had taken security over the most valuable asset in the Arrium Group, threatening to bring the whole thing down through their own insolvency proceedings.

So the courage of the banks to fund into that and to repay GSO US$120m is important because we got rid of GSO and it’s also important from a bank’s perspective because they agreed to fund in circumstances where they were not guaranteed that GSO would release all of their securities. There was still a debate on that point, but they thought it was so important that they moved ahead, funded it out, and ultimately were victorious against GSO.

How was the financing structure changed during the administration and what benefits did this provide to creditors?

Ken Astridge: The financing structure changed post-administration primarily due to the work that the restructuring team did and quite cleverly were able to create a document which they called the Override Deed which effectively overrode all of the rights of lenders and combined them into one voting group. That streamlined decisions, it also streamlined the ability to put propositions to a very, very large lender group, and also assisted, I think, in maintaining confidentiality in relation to certain information bites in a world where lenders want to trade their debt - you can’t trade your debt if you have confidential information so the Override Deed cleverly dealt with those issues.


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