KordaMentha KordaMentha is an Australian advisory and investment firm that provides specialist forensic, real estate, turnaround / restructuring and investment management services. The business was formed in April 2002 by Mark Korda and Mark Mentha. Located at
Level 24, 333 Collins Street, Victoria, Australia.
Phone: +61 3 8623 3333

Ensuring the survival of a key community business - Proserpine Sugar Mill

KordaMentha Partner Robert Hutson reflects on the appointment to and sale of the Proserpine Sugar Mill, one of the cornerstone businesses in the community of Proserpine, Queensland.


Proserpine Sugar Mill

'KordaMentha was appointed Voluntary Administrators to the Proserpine Co Operative Sugar Milling Association Limited on 6 November 2011. The Proserpine Sugar Mill was the last Co Operative  Sugar Mill in Queensland with approximately 220 member growers supplying sugar cane to the Mill and an employee base of approximately 180 employees, excluding seasonal workers employed during the crushing of sugar cane.  In the 2011 crushing season, the Mill crushed approximately 1.4 million tonnes of sugar cane.

 

The appointment followed the failure of two required special resolutions from the members of the Co Operative to approve the sale of the Mill in August and October 2011.  Under the rules of the Co Operative Act 1997 the sale of a business representing greater that 5% of the Co Operative’s asset base required a special resolution of 75% of valid member votes to approve the sale. In each occasion approximately 70% of members voted in favour of the sale which was short of the required majority.

 

After the second failed vote in late October 2011, the Mill’s major financier withdrew ongoing support and the Board was unable to source satisfactory alternative funding to allow for the continued operation of the Mill.   Based on these events an urgent Board meeting was held on Sunday 6 November 2011 where it was resolved that the Co Operative was insolvent. KordaMentha was appointed as Administrators of the Mill on the same day.

 

Upon appointment, KordaMentha continued to operate the Mill which was in a crucial maintenance stage in preparation for the next crushing season. After conducting a financial assessment of the Mill it was clear the business had insufficient working capital to continue operating and an urgent sale as a going concern was required.

 

The financial state of the Mill was dire and the KordaMentha team quickly recognised that the business would have effectively run out of funds to continue the trading operations by the end of the second week of the appointment. Whilst dealing with the ongoing critical trading, insurance and funding issues, urgent negotiations were also taking place with interested parties for the sale of the Mill’s assets. Two parties expressed interest in purchasing the Mills assets and were invited to present their best offers to purchase the Mill’s assets.


On 11 November 2011, KordaMentha held urgent meetings with both interested parties and their representatives to assess the components and conditions of each offer. KordaMentha then undertook the task of assessing the complex offers to determine which offer should be accepted. The headline prices offered by the parties were widely reported in Queensland media as being $120 million and $122 million respectively, however, various terms and settlement adjustments meant a detailed review of the financials was needed to determine the estimated bottom line return to members. This review was particularly complex given both parties had the opportunity to develop and articulate the terms of the offers over a number of months prior to the appointment whereas the Administrators had to achieve a complete understanding of the offers in a few days.

 

On 16 November 2011, it was determined that an offer to Purchase the Mill’s assets needed to be concluded as resources required to fund the day to day operations of the Mill had been exhausted. On this basis KordaMentha selected the party with the assessed superior offer based on the best known information at the time and entered into a binding asset sale agreement which included a funding facility to allow the ongoing trade of the Mill up to the date of completion. The sale was subject to the ratification of creditors at the second meeting of creditors which was held on 9 December 2011.

 

At that meeting, an overwhelming majority of creditors in attendance voted in favour of the sale entered into by KordaMentha, with 97% of value and 93% in number of creditors in attendance voting in favour of the sale.

 

After the result was determined, KordaMentha and the purchaser moved quickly to finalise the transaction and settlement occurred that afternoon on 9 December 2011.


The KordaMentha team negotiated, agreed and settled a $120 million plus dollar transaction within five weeks of being appointed. This was a significant achievement as KordaMentha dealt with numerous trading, funding and sale issues whilst having a high visibility in the community and the local, state and national media.' 


As a result of the completion of the sale the following outcomes were/will be achieved:

  • The payment in full of all secured creditors
  • The payment of accepted unsecured creditor claims, including grower members, at 100 cents in the dollar
  • The transfer of all full time employees of the Mill to the successful purchaser. The Mill is the largest employer in the Proserpine community and the ongoing employment of Mill employees provided essential job security which was a great concern of the Mill’s employee base during the appointment
  • Ongoing certainty in the ability for grower members to continue to supply sugar cane to the Mill
  • A significant distribution of surplus funds to the grower members of the Co-Operative.

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