Quintis will miss next interest payment to bondholders
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Quintis will miss its August 1 semi-annual payment to bondholders. Ralph Bestic
by
Vesna Poljak
Quintis has confirmed the worst fears of bondholders and will miss its interest payment due on Tuesday after protracted negotiations around a recapitalisation failed to deliver a result in time.
The sandalwood group has not given up hope of a rescue and told the ASX on Monday that it is still in discussions with a view to reviving the business.
But the shares have not traded since May and Quintis has now set September 1 as its target for resuming trading. That is only if the former TFS can avoid collapse given its cash-strapped position, extensive liabilities and the market's loss of confidence in its business model.
Owners of Quintis bonds, issued in 2016, will not see their $US10.9 million ($13.7 million) interest payment on August 1.
The company has until the end of August to come up with the payment or obtain another waiver from its noteholders. The Perth-based group has already been excused from its obligations once, when it relied on a waiver to get out of filing its March quarter accounts. Without this, it would have defaulted on July 8.
Since its market value spiralled in May, Quintis has been running down its cash pile at an exhaustive pace.
But it has failed to tackle its somewhat unique liabilities, including extinguishing a live put option that entitles its holder to force the company to buy back 400 hectares of immature sandalwood trees for $33.9 million.
The put is held by
plantation investor Davidson Kempner and its strike window has been rolled to August 2 to 4.
Deferring the put option was one of the terms bondholders demanded in exchange for the waiver tied to its failure to submit March accounts. That waiver expires on August 9.
The sensational drama at Quintis began in March when
US short-seller Glaucus Investments targeted the company in high-profile fashion, alleging in a contested report that its equity was worth zero, and likening the business to a ponzi scheme. That was followed by the resignation of its founder, Frank Wilson,
who quit to pursue a privatisation with a mystery investment partner.
In challenging Glaucus' claims, the company admitted that it had lost its biggest customer in China, amid a broader customs duty scandal linked to sandalwood imports. There was worse to come.
As Quintis struggled to contract a new buyer in China, despite its assertions that this was only a matter of time, it emerged that the company had lost Nestle's Galderma as an oil customer back in 2016.
This happened, by all accounts, without the knowledge of the board and management
who claim to have been unaware of this until May this year. This is also apparently true,
despite Galderma not having placed an order with the company since June 2015.
Analysis from one London-based credit expert circulated in June suggests
bondholders could see as little as 37.3¢ in the dollar back.
Meanwhile,
a collective of small plantation investors known as Sandalwood Growers has united amid concerns that the company will mismanage their investments.
