In light of the Australian Government’s recent consultation paper on improving creditors’ schemes of arrangement, we have assessed how creditors’ schemes of arrangement have actually been used in the Australian market since the global financial crisis in 2008.
We set out the summary of this assessment, and some key observations below. We think this data will help inform the debate about what if any reforms would be appropriate to creditors’ schemes of arrangement in Australia.
The attached Post-GFC Schemes of Arrangements in Australia document sets out every Australian creditors’ scheme of arrangement (that we are aware of – let us know if we have missed any) since 2008.
A number of observations can be drawn from this summary:
- There have only been 17 creditors’ schemes of arrangement in Australia since 2008 – this works out at 1.3 creditors’ schemes per year.
- Most of the creditors’ schemes (13; 76.47%) have only involved the finance debt of the company – trade creditors have been unaffected.
- Only 4 of the creditors’ schemes (23.53%) have involved trade creditors, and of these 3 were liquidation distribution schemes rather than schemes used for restructurings.
- Ovato is the only creditors’ scheme involving a restructuring of the company where trade creditors were subject to the terms of the creditors’ scheme.
- Creditors’ schemes have only been used where there is a large amount of debt subject to the schemes – ranging from $107.6 million – $3.4 billion, with a median amount of $704 million.
- Most creditors’ schemes (14; 82.35%) have not utilised the existing section 411(16) moratorium orders.
- Most of the creditors’ schemes could be characterised as “de-leveraging restructurings” (12; 70.59%), where the main purpose has been to reduce the finance debt to sustainable levels. This has usually involved debt for equity swaps.
These factors should be borne in mind by Government when considering any changes should be made to the Australian creditors’ schemes of arrangement regime.
We discussed other issues arising from the consultation paper on creditors’ schemes of arrangement in our previous article.