Background
Settlors Company Pty Ltd and Settlors Operations Pty Ltd operated five retirement villages, two in Queensland, two in Western Australia and one in New South Wales. The villages were acquired from Ingenia Communities in 2011 by Forum Partners, a global real estate management firm, for $50.35 million, funded by loans from Investec Australia.
In 2017 amendments to the Retirement Villages Act (Qld) made it compulsory for a village to repurchase a unit within 18 months of a termination notice being issued by a resident or their estate. The legislation took effect on 23 May 2019 and created an immediate buyback obligation of $1.5 million, which shareholders and lenders declined to fund. Comparable legislation was planned for New South Wales. Two major sales campaigns run across 2018 and 2019 failed to yield an offer sufficient to settle the secured facilities.
The company was placed into administration on 26 August 2019, with FTI appointed Receivers and Managers on 28 August 2019. With receivers controlling the secured assets, the immediate priority was continuity of care for residents:
Negotiation and Creditor Approval
Olvera negotiated a co-operation agreement with the Receivers and Managers governing the trading operations of the villages, and liaised with the relevant State Government authorities on village management and the statutory buy-back obligations, and with residents and resident estates on their individual entitlements.
Once the villages were sold, the remaining obstacle to a return to creditors was the residual claim position of the two principal financial stakeholders. Olvera negotiated the terms of a deed proposal under which residual claims would be settled through a Deed of Company Arrangement on completion of the sale, and secured the release of the residual claims of Investec and Ingenia, the step that made the deed viable.
