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Does this mean Santalis was to be his lifeboat? Where is he...

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18/12/17

10:06

Post #: 29699519
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Originally posted by StockDebater ↑

Thanks @Freddyray,

I wrongly assumed FW's financial woes and his margin loan hadn't been cleared up.

However there does seem to be some amazing synergies between Frank's personal finance woes and the tangled financial mess that Quintis is embroiled in.

I find it incredibly interesting that he'd attend the AGM to question the boards management when he was most likely overseeing most of the poor decisions that have led to the current Quintis calamity.

by Vesna Poljak

Quintis founder Frank Wilson was in a legal dispute with his margin lender last year, leading him to make the allegation to a US court that a parcel of his shares were wrongly seized in a "sham" deal.

The case, which was dismissed in June with no findings of fault against any party, shows that at one point Mr Wilson did not know where his shares were, who was the custodial provider, and whether they were sold or loaned out.

Claims made by Mr Wilson in the proceedings also suggest how dogged the former boss was in its pursuit of a float of the Santalis business in the US, and potentially securing a secondary listing for the former TFS on the Nasdaq exchange. It has previously attached a price tag of of up to $US500 million ($635 million) to Santalis.

Today, Quintis is still fighting for a recapitalisation and it has not traded since May. Mr Wilson resigned as its CEO in March after a US short seller, Glaucus, authored a damning research report about the company's business model and the sandalwood market.

The dispute was apparently triggered when loan documents to extend Mr Wilson's 2015 borrowings to $53 million via a second and entirely revised margin lending facility were prepared and returned to the defendants, which are Emerging Markets Intrinsic Cayman and its affiliates.

Mr Wilson and his advisor say they only did this as a goodwill gesture when talks over new terms broke down, as Mr Wilson was insisting on conditions, including that the collateral be voted as per his instructions at the AGM in November of 2016. But the lender saw this as a binding agreement.

Based on his claims made in court documents filed March 2017, Mr Wilson insisted that he never authorised being bound by any term sheet. He also claims that a facsimile signature of his was applied to the agreement that sealed the deal, despite his advisor, Lucerne, having no authorisation to do so because the terms were still unsatisfactory to Mr Wilson. Lucerne however was acting on the belief that the transaction was still entirely non-binding (it was a plaintiff in the action).

Everything went wrong for Mr Wilson on November 3, 2016, when he got an e-mail from Lucerne's Anthony Murphy about a notice of default from the EMI-linked entity CGO V.

This was apparently the case even though Mr Wilson never saw a cent from the contested second loan.

On November 4, CGO V sent a notice demanding $23.7 million by November 9 and Mr Wilson believed the collateral shares – then worth $34 million – were at risk of being sold.

"As recently as January 27, 2017, and in formal discovery requests, Mr Wilson requested the current location of the collateral shares, but EMI, through its counsel, has refused and continues to refuse to disclose that information," documents say.

EMI also "refused" to pay the Wilson family's trust its entitled dividend last year, it is alleged, worth $676,020.

In conveying to the court the stakes for Mr Wilson and Quintis, the plaintiffs point to the potential for Santalis to be spun out of the company and the negative impact any sale of Mr Wilson's parcel would have on the market cap.

Santalis investigates and markets clinical applications for pharmaceutical-grade Indian sandalwood oil. Santalis is also the entity that was separately found to have been on the wrong end of a supply contract terminated by Galderma that highlighted disclosure inadequacies at Quintis. This revelation caused a near-fatal sell-off in the stock in May as investors lost confidence in the company.

The same disclosure issues are now the core of a shareholder class action brought by Bannister Law against Quintis in the Federal Court.

"Defendants' misconduct has also disrupted, and threatens to derail, Santalis' potential IPO and US listing and TFS' potential opportunity to consider a dual listing," it is alleged.

The Lucerne and EMI relationship also soured based on evidence produced.

In messages and phone calls, Mr Murphy was allegedly told by EMI partner Eric Maass "I'm going to f***ing end Lucerne and your 20 something employees", "I am one person u don't f*** over" and "I've emailed MNY and JKL" (being two unidentified corporate clients of Lucerne's).

"The evidence will show that harsh language flowed in both directions," the defendants submit.

This was said to be in response to EMI seeing a copy of Mr Murphy's declaration.

"After Mr Murphy provided his truthful declaration, Maass followed up on his threats by reaching out to at least four clients of Lucerne," who it is suggested had relationships with EMI, according to the plaintiffs' account.

In a response to questions on Friday, Mr Wilson confirmed that the $53 million agreement "did not occur", that he has entered into a confidential settlement agreement with EMI, and cannot comment further.

"Mr Wilson further notes that the s604 notice lodged this week reflects an accurate position of his shareholding in Quintis. Mr Wilson is the holder of the relevant interest in the shares. As per the s604 notice, some of these shares are held as security against a loan with Mr Wilson having the right to retransfer upon repayment of the loan."

The 2015 lending agreement saw Mr Wilson borrow $13.25 million at 4.6 per cent, non-recourse. For that, he pledged 22 million shares held by the family trust, or 40 per cent of his stock.

According to EMI's version of events, Lucerne – acting as the intermediary – allegedly defaulted on the second deal when it failed to deliver further shares (more than 47 million including the already transferred shares) as collateral by November 1. This apparently gave CGO V the right to liquidate the shares it already held over from the original 2015 agreement.

The second loan was struck at 3.95 per cent escalating to 15.95 per cent in a default and some of the collateral would be held for trading in a profit-share arrangement with EMI. The call price on the margin loan was to be $1.05, meaning a margin call would occur if the shares went below that level.

Mr Wilson was pushing for new terms late into talks but EMI was resistant.

On October 31, the deal appeared off. Mr Maass said, "It's dead and this has gone very wrong in the 11th hour."

But on November 1, Mr Wilson apparently wanted to go ahead. So Mr Murphy prepared agreements on Mr Wilson's behalf and although he asked for new terms, again, lawyers for EMI say this was without insisting on them or indicating the papers were a mere goodwill gesture.

The Wilson family trust sought an injunction, which led to the court action.

courtesy of Australian Financial Review

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Does this mean Santalis was to be his lifeboat? Where is he living now?

QIN Price at posting: 29.5¢ Sentiment: None Disclosure: Not Held
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