First Meeting of Creditors 19 March 2020 2 Agenda Formalities - - PowerPoint PPT Presentation

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First Meeting of Creditors 19 March 2020 2 Agenda Formalities - - PowerPoint PPT Presentation

Feb 07, 2023 47 likes •403 views

Addcar Mining Solutions Pty Ltd Addcar Engineers Pty Ltd Addcar Holdings Pty Ltd Addcar Management Services Pty Ltd Addcar Contracting Services Pty Ltd Addcar Equipment Hire Pty Ltd Addcar Engineers Civil Services Division Pty Ltd Pipelion

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Addcar Mining Solutions Pty Ltd Addcar Engineers Pty Ltd Addcar Holdings Pty Ltd Addcar Management Services Pty Ltd Addcar Contracting Services Pty Ltd Addcar Equipment Hire Pty Ltd Addcar Engineers Civil Services Division Pty Ltd Pipelion Manufacturing Pty Ltd Addcar Highwall Mining Pty Ltd Addcar USA Interest Pty Ltd (All Administrators Appointed) (Collectively “the Addcar Group”)

First Meeting of Creditors

19 March 2020

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  • Formalities
  • Resolution (concurrent meetings)
  • Purpose of meeting
  • Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) and remuneration
  • Purpose of administration
  • Background and operations
  • Financial position and performance
  • Directors’ reasons for failure
  • Administrators’ actions since appointment
  • Sale process
  • Administrators funding
  • Employees
  • DOCA v Liquidation
  • Questions
  • Resolutions (Committee and replacement of Voluntary Administrators)

Agenda

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  • Open meeting
  • Administrator Chairperson: IPR 75-50
  • Introductions:

– Jonathan Henry (Administrator) – Chris Johnson (McGrathNicol Director) – Jason Pietzner (McGrathNicol Director) – Louise Mann (McGrathNicol Senior Manager)

  • Quorum: IPR 75-105
  • Attendance register
  • Voting
  • Time and place convenient: IPR 75-30
  • Proofs of debt and proxies

Formalities

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“that the meetings of creditors of each of the Addcar Group companies, being:

  • Addcar Mining Solutions Pty Ltd
  • Addcar Engineers Pty Ltd
  • Addcar Holdings Pty Ltd
  • Addcar Management Services Pty Ltd
  • Addcar Contracting Services Pty Ltd
  • Addcar Equipment Hire Pty Ltd
  • Addcar Engineers Civil Services Division Pty Ltd
  • Pipelion Manufacturing Pty Ltd
  • Addcar Highwall Mining Pty Ltd
  • Addcar USA Interest Pty Ltd

(All Administrators Appointed) be held concurrently”

Resolution: meetings to be held concurrently

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  • Convened under Section 436E of the Corporations Act to:

– determine whether to appoint a Committee of Inspection to each Company, and if so, who are to be the Committees’ members; and – consider the removal of the Administrators and appoint an alternative Administrator who has consented to act

  • This meeting has no authority to consider any other business
  • At the second statutory meeting, a decision is made regarding the Addcar Group’s future

Purpose of meeting

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DIRRI

  • DIRRI dated 12 March 2020 - distributed with notice of meeting
  • DIRRI is available for inspection
  • We remain of the view that we are free of any potential conflict of interest
  • No indemnity or up-front payment of fees
  • DIRRI tabled

Remuneration

  • Schedule of rates provided with meeting information
  • Comprehensive remuneration report will be provided prior to the second meeting of creditors

Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) and remuneration

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  • Directors’ powers are suspended and Administrators are in control
  • Voluntary Administration provides moratorium period for investigation / determination of companies’ future:

– Return company to Director; – Deed of Company Arrangement; and – Liquidation

Purpose of administration

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Voluntary administration timeline

VA appointed 9 March 2020 Written notice of first meeting mailed to creditors and employees on 12 March 2020 1st meeting of creditors held Purpose: (i) Replace VA (ii) Consider the appointment of a Committee of Inspection Complete preliminary investigation 2nd meeting of creditors held Options: (i) DOCA (ii) Liquidation (iii) Return to director Issue Administration Report and form opinion as to future of the Addcar Group Administrators take control of Addcar Group and its assets Receive any DOCA proposals Within 8 business days 19 March 2020 Within 25 business days 15 April 2020 Within 30 business days 22 April 2020

The Easter holiday period extended the Voluntary Administration timeline by 5 business days

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SLIDE 9 10 Not in Administration Addcar Highwall Mining ACN 603 120 716 ACN 603 121 615 ACN 118 214 172 ACN 139 846 745 ACN 139 849 246 ACN 077 167 113 ACN 110 563 758 ACN 137 939 416 Addcar Contracting Services Addcar Equipment Hire Addcar Systems LLC Addcar Engineers Civil Services Division Pipelion Manufacturing Addcar Mining Solutions Addcar USA Interest Pty Ltd ACN 127 633 694 ACN 633 757 712 Addcar Engineers Addcar Holdings Addcar Management Services Key: Employing entity Highwall Mining Pipelion Corporate Interest USA – related entity

Corporate Structure

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Historical timeline

FY15 Rev: $79.8m EBITDA: $17.3m 2017 Sale of Engenicom Pty Ltd to Associate 9 March 2020 Voluntary Administrators appointed to Addcar Group Dec 19 Incident in pit 3 – Dawson mine. Hog miner and 2 cars trapped underground – results in reduced rate. FY16 Rev: $70.1m EBITDA: $5.2m FY17 Rev: $67.75m EBITDA: $5.4m FY18 Rev: $84.6m EBITDA: $3.3m 1997 UGM Founded in 1997 in the Hunter Valley, NSW 2011 UGM entered the highwall mining market, and secured the licence to
  • perate the
Addcar mining system from BHP 2014 UGM acquired Addcar from its US owners Nov 2018 Addcar secures Facility A: Secured Loan Note facility $13.5m Nov 2019 Addcar secures Facility B: Secured Loan Note – CapEx facility $2.0m 30 Jan 2020 Addcar secures Facility C: Secured Loan Note facility $2.0m Oct 2019 – Mar 2020 US sale to Mega (delayed completion) FY19* Rev: $82.9m EBITDA: $14.3 Oct 18 Sale of UGM Diesel Services Pty Limited, UGM Electrical Services Pty Ltd and Underground Coal $31.5m FY19 Dividend paid $14.0m Debt repaid $18.0m 2 Mar 2020 Addcar seeks further secured funding $4.0m *Continuing operations Labour/plant hire HWM $63.6m Manufacturing $3.3m Machine Sales $16.0m Total $82.9m Mar 2019 $13.5m transferred to support US business & commence Cline JV
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  • Addcar Group’s Australian operation owns and operates two HWM systems in Australia (the only owner and
  • perator of HWM systems in Australia).
  • One is currently contracted with Anglo Coal at the Dawson mine site in Northern Queensland, which is estimated

to run until August or possible through to December 2020.

  • There is a potential pipeline of projects for the system that will be demobilised from the Peabody Millennium

mine in March 2020.

Australian operations

Systems Item No. Launch Vehicle 2 Conveyor cars 80 Stackers 2 Continuous Miners 4
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  • The USA Operations consists of Addcar Systems LLC, which includes a contract services business with two systems

currently on-hire at Peabody mine sites in Indiana, one system on-hire at Cline & Sons Sand and Gravel mine in West Virginia, and an OEM business located in Ashland, Kentucky capable of repairs, maintenance and manufacturing new systems.

  • Addcar USA Interests Pty has a Joint Venture (“JV”) arrangement with Cline & Sons.
  • We note the US business is not subject to external administration.

United States operations

ADDCAR Systems LLC Highlights Item No.
  • No. of HWM systems
3 Operating sites (excludes OEM site) 3 FTE’s 50 Addcar USA Interest Pty Ltd Highlights Item No.
  • No. of HWM systems
nil Operating sites 1 Employees Nil
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SLIDE 13 14 Addcar Group - Financial Performance - February 2019 to January 2020 Account Addcar Highwall Mining Pipelion Manufacturing Addcar USA Addcar Corporate Addcar USA Interest * Total Revenue 55,278,188 3,894,186 16,428,000 91,519 2,945,212 78,637,105 COGs (29,866,860) (2,877,102) (18,879,295) (2,171,986)
  • (53,795,243)
Gross Profit 25,411,328 1,017,084 (2,451,295) (2,080,467) 2,945,212 24,841,862 GP margin 46% 26% (15%) (2273%) 100% 32% Other expenses (1,984,843) (456,053) (3,242,772) (363,691) (62,224) (6,109,583) Overheads (2,834,956)
  • (997,611)
  • (3,832,567)
EBITDA 20,591,529 561,031 (5,694,067) (3,441,769) 2,882,988 14,899,712 EBITDA Margin 37% 14% (35%) (3761%) 98% 19% Depreciation (9,864,085) (148,020) (3,013,000) (832,559)
  • (13,857,664)
EBIT 10,727,444 413,011 (8,707,067) (4,274,328) 2,882,988 1,042,048 Interest (1,183,575) (36) (677,000) (52,726)
  • (1,913,337)
Net Profit 9,543,869 412,975 (9,384,067) (4,327,054) 2,882,988 (871,289) * Note: Addcar USA Interest data June 2019 to January 2020

Financial performance

The recurring losses of Addcar USA in the preceding 12 months has had a significant impact on the Group’s profitability. Represents an allocation of head office costs to direct expenses relating to production in the
  • perational units
NB: “Addcar USA” refers to the US based entities that are not subject to our appointment. Overhead structure has been unsustainable for the
  • ngoing operation of the Group when combined
with the recurring losses of Addcar USA.
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SLIDE 14 15 Addcar Group - Financial Position as at January 2020 Account Addcar Highwall Pipelion Manufacturing Addcar USA* Addcar Corporate Addcar USA Interest Total Current assets 1,896,567 1,613,602 15,723,376 6,548,472 3,626,155 29,408,173 Fixed assets 33,769 112,996 6,107,556 36,385,209
  • 42,639,530
Deferred tax asset 999,621 709,914
  • 1,171,889
  • 2,881,424
Loans 561,901 (2,146,385) (24,534,101) 26,871,890
  • 753,305
Total assets 3,491,858 290,127 (2,703,169) 70,977,461 3,626,155 75,682,432 Current liabilities (3,556,079) (849,781) (3,462,022) (9,783,896)
  • (17,651,777)
Non-current liabilities
  • (15,993,460)
(742,167) (16,735,628) Total liabilities (3,556,079) (849,781) (3,462,022) (25,777,356) (742,167) (34,387,405) Net Assets (64,221) (559,654) (6,165,191) 45,200,105 2,883,988 41,295,028 * Note: Addcar USA is not under Voluntary Administration

Financial position

Primarily of this value is inventory and debtors. The debtors held in the Australian entities are likely to be recovered, however the USA debtors of c.$6 million remain uncertain. Majority of fixed assets are the HWM equipment located at Dawson and Millenium Mines in Australia and as part of the USA operations. Intercompany loans with the majority owing from Addcar USA to Addcar Management Services within the Addcar Corporate group Deficiency in net assets NB: “Addcar USA” refers to the US based entities that are not subject to our appointment.
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The directors have provided a statement regarding their reasons for the failure of the Addcar Group. They have attributed this to:

  • Operations in USA trading poorly;
  • The purchaser of US assets being unable to complete within the agreed timeframes;
  • The collapse of the Dawson mine, burying the miner; and
  • Lower than expected production levels at both Australian sites.

The statement will be read in full to the meeting.

Directors’ reasons for failure

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  • Working to stabilise the operations to maximise recoveries and/or the chances of the businesses continuing to
  • perate
  • Met with and briefed employees across all locations (including “Millennium” and “Dawson” and mine sites)
  • Contacted and met with key customer contacts
  • Wrote to suppliers and commenced discussions with key suppliers to open administration trading accounts
  • Commenced a sale and recapitalisation campaign for all or part of the business or its assets
  • Secured assets
  • Commenced a detailed review of operational requirements and assets
  • Commenced demobilisation of the Millennium mine system
  • Obtained briefings on key disputes
  • Prepared a detailed cash flow forecast for the initial voluntary administration period
  • Attended to all statutory notification obligations
  • Convened and prepared for the first meetings of creditors

Administrators’ key actions since appointment

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  • Soon after appointment, the Administrators arranged for agents to undertake a valuation of the business and assets with a

view to starting an accelerated sale process.

  • The indicative timetable for the sale is as follows:
  • To date a number of interested parties have been contacted and provided with marketing material.
  • The outcome of the sale process may be:

– Asset sale (whole or break-up) – Share sale of Addcar Group – Divestment of US equity interests

Sale process

Indicative sale timetable EOI open (flyer available) 13 March 2020 EOI close, interest reconfirmed 20 March 2020 Stage 1 data room access available 16 March 2020 Non Binding Offers due 25 March 2020 Preferred bidders due diligence ~ 2 weeks following non-binding offers Final bids due 6 April 2020
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  • There is currently a cash shortage in the business.
  • It has become necessary for the Administrators to approach the original secured creditors for funding:

– To continue to trade whilst an expedited sale takes place; and – De-mobilise the Millenium mine site.

  • The Administrator believes that this is in the best interest of all creditors
  • The Administrator is currently negotiating a funding agreement with Remagen Capital.
  • Section 443A of Corporations Act: Administrators are personally liable for debts they incur in the performance of

their role as Administrator.

  • The Administrator is therefore seeking a court order modifying that section of the Act so that the liability

continues to rest with the Company, rather than the Administrator personally.

  • Do any creditors have objections to:

– The Administrator seeking this external funding; and – The amendment of the section of the Corporations Act.

Administrators funding

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  • It is too early to form conclusive views on the potential return to unsecured creditors
  • The order in which different classes of creditors are paid is determined by the Corporations Act
  • Generally, the order of priority is as follows:

– Employees (from certain categories of assets) – Secured creditors – Unsecured creditors – Shareholders

  • Considering the indicative creditor profile of the business, in any scenario, strong offers are needed to

compensate all creditors

  • In liquidation, some avenues of recovery are open to creditors that are not otherwise available

Potential return to creditors

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  • The Addcar Group has approximately 90 employees
  • The Administrators are responsible for all wages and entitlements accrued post appointment, to be paid from

funding obtained and trading surpluses

  • For pre-appointment entitlements, employees are afforded a priority under s556 of the Corporations Act
  • Employee entitlements recoveries are available from the net proceeds of circulating asset realisations or may be

preserved on a transfer of employment if available Fair Entitlements Guarantee scheme (FEG)

  • In the event of liquidation, outstanding entitlements exist, employees will have access to the Department of Jobs

and Small Business’ FEG scheme

  • FEG is generally available when:

– the employer is in liquidation; – employment was terminated due to insolvency/liquidation; – employees cannot get payment of the entitlements from other sources; and – employees were an Australian citizen or the holder of a permanent visa or special category visa that allowed the employee to stay and work in Australia at the time their employment ended.

Employees

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Liquidation vs Deed of Company Arrangement

  • A DOCA is a binding arrangement between a company and its

creditors.

  • Very flexible
  • The business may continue to trade (dependent on terms of

the DOCA) Deed of Company Arrangement (“DOCA”)

  • At the second meeting, creditors may vote for the liquidation
  • f the Companies.
  • Voidable transactions can be pursued in liquidation.
  • Employees may access the Fair Work Entitlements Guarantee

Scheme (“FEG”). Liquidation

  • In our report to creditors, we will either recommend the DOCA or liquidation.
  • The Administrators are preparing for either outcome.
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Q & A

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  • Pursuant to Insolvency Practice Schedule (Corporations) (IPS) 80-10, creditors may, by resolution, determine whether there is

to be a committee of inspection.

  • Role:

– consult with the Administrators about matters relating to the administration; – receive and consider reports by the Administrators; and – approve Administrators’ fees

  • In this case, we recommend that a committee of inspection is appointed in this respect.

Resolutions – Committee of Inspection

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  • Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Addcar Mining Solutions Pty Ltd (Administrators Appointed)”.

Resolutions – Committee of Inspection - Addcar Mining Solutions Pty Ltd

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  • Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Addcar Engineers Pty Ltd (Administrators Appointed)”.

Resolutions – Committee of Inspection - Addcar Engineers Pty Ltd

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  • Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Addcar Holdings Pty Ltd (Administrators Appointed)”.

Resolutions – Committee of Inspection - Addcar Holdings Pty Ltd

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  • Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Addcar Management Services Pty Ltd (Administrators Appointed)”.

Resolutions – Committee of Inspection - Addcar Management Services Pty Ltd

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  • Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Addcar Holdings Pty Ltd (Administrators Appointed)”.

Resolutions – Committee of Inspection - Addcar Contracting Services Pty Ltd

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  • Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Addcar Equipment Hire Pty Ltd (Administrators Appointed)”.

Resolutions – Committee of Inspection - Addcar Equipment Hire Pty Ltd

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  • Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Addcar Engineers Civil Services Division Pty Ltd (Administrators Appointed)”.

Resolutions – Committee of Inspection - Addcar Engineers Civil Services

Division Pty Ltd

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  • Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Pipelion Manufacturing Pty Ltd (Administrators Appointed)”.

Resolutions – Committee of Inspection - Pipelion Manufacturing Pty Ltd

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  • Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Addcar Highwall Mining Pty Ltd (Administrators Appointed)”.

Resolutions – Committee of Inspection - Addcar Highwall Mining Pty Ltd

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  • Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Addcar USA Interest Pty Ltd (Administrators Appointed)”.

Resolutions – Committee of Inspection - Addcar USA Interest Pty Ltd

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  • Resolution – replacement of Voluntary Administrator (if required)

“That Jonathan Henry, Jason Preston and Jamie Harris are replaced as administrators of the Addcar Group and …………………………………………………… is/are appointed as Voluntary Administrators of the Addcar Group”.

Resolutions – Replacement of Voluntary Administrator

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