BACKGROUND
7 On 24 July 2024, the Administrators were appointed, jointly and severally, as Administrators of each of the Companies by resolution of directors of those Companies pursuant to s 436A of the Corporations Act 2001 (Cth).
8 On 30 July 2024, the Plaintiffs filed an originating process seeking orders for limitation of liability under s 447A(1) of the Act which were made by Halley J sitting as Commercial and Corporations duty judge on 2 August 2024: Anderson (administrator), in the matter of S&W Holdings Australia Pty Ltd (administrators appointed) [2024] FCA 878.
9 It is convenient to extract from S&W Holdings Australia the following relevant matters of background (at [5]-[14]):
[5] The Companies are part of a broader corporate group which is based in the United States. S&W Holdings is the holding company of the Australian arm of the group, and wholly owns the shares of S&W Seed, and indirectly through its shareholding in S&W Seed, all other downstream Australian companies in the group.
[6] The Companies conduct a business of processing high quality seeds for Australian agriculture and international distribution. S&W Seed purchases various types of seeds from a network of over 100 Australian based farmers. S&W Seed then coats and treats those seeds using a specialised process that is undertaken at particular seed processing facilities that are either owned or leased by S&W Seed (Facilities). After the seeds have been coated and treated, S&W Seed then distributes them to customers in both Australia and internationally.
[7] Mr Anderson gives evidence that the catalyst for the appointment of the Administrators appears to be that the Companies faced significant trading challenges primarily due to the imposition of import sanctions in Saudi Arabia that prevented S&W Seed's key customers in that country from purchasing certain seeds.
[8] Prior to the appointment of the Administrators, S&W Seed, which was the trading entity, employed approximately 56 employees. The business has continued to trade since the appointment of the Administrators, and to date, those employees have been retained.
[9] The creditors of S&W Seed include:
(a) lenders under secured corporate debt financing facilities, including NAB, who together are owed approximately $50 million;
(b) trade creditors owed approximately $9.8 million; and
(c) employees with respect to leave entitlements totalling approximately $1.15 million.
[10] NAB is a secured creditor under the terms of a finance agreement between NAB, S&W Seed (as borrower), and S&W Holdings (as a guarantor and security provider) dated 29 June 2023 (subsequently amended and re-stated) (Finance Agreement).
[11] Since the appointment of the Administrators, NAB has not taken any steps to enforce its security interest over the property of the Companies.
[12] Mr Anderson gives evidence that the Companies presently have no cash on hand, and the administrations are currently being funded by way of an interim funding arrangement with NAB pursuant to which the bank has provided the Administrators with access to a temporary $400,000 overdraft (Overdraft Arrangement).
[13] Mr Anderson gives evidence that a more comprehensive funding agreement with NAB is in the process of being negotiated. It is envisaged that that funding agreement will provide funding of up to $1.8 million, which would then permit the Administrators to meet ongoing trading expenses during the administrations, including importantly, payment of employee wages.
[14 ] The terms of the Overdraft Arrangement are in accordance with the existing Finance Agreement which was agreed between NAB and the Companies well prior to the commencement of the administrations. The amount that the Administrators have currently caused the Companies to draw down on the overdraft in accordance with the Overdraft Arrangement is presently in an amount of $155,362.42 for the purpose of making payments of wages to employees.
10 The Plaintiffs' submissions summarise the following salient developments that have occurred in the administrations of the Companies in the period since 2 August 2024.
11 The Administrators have continued to trade the S&W Business on a "business as usual" basis, including facilitating payments for operational and trading costs of the Business and continuing the employment of all 56 staff members and facilitating the payment of post-appointment employee wages.
12 As mentioned, on 5 August 2024, the first meeting of the creditors of S&W was held. The meeting of S&W Holdings was inquorate, essentially because S&W Holdings did not trade and had no creditors other than contingently pursuant to a guarantee in favour of National Australia Bank Limited (NAB). At the first meeting of S&W, in response to a question from a creditor, the Administrators indicated that, depending on the process for the sale or recapitalisation of the Companies' business and assets, there was a good prospect that the Administrators would apply to extend the Convening Period. Mr Anderson deposes that no creditor expressed opposition to the potential extension to the Convening Period.
13 Mr Anderson deposes to the steps taken by the Administrators to commence the process of recapitalising the Companies or selling the S&W Business and the Companies' assets as a going concern (Sale Process).
14 Mr Anderson in his evidence addresses in detail the steps taken to date in the Sale Process, including: advertising for expressions of interest from potential buyers, entry into non-disclosure agreements and solicitation of non-binding indicative offers (NBIOs), liaising with offerors, shortlisting potential bidders (Shortlisted Bidders) based on the Administrators' assessment of the NBIOs and the operation of a due diligence data room accessible to Shortlisted Bidders.
15 Mr Anderson has deposed to the next steps in the Sale Process which include further assessment of the NBIOs, liaising with Shortlisted Bidders, and extracting final binding offers from Shortlisted Bidders by 30 August 2024.
16 In deposing to the likely timeframe to complete the Sale Process, Mr Anderson properly notes that the Administrators intend to move as quickly as possible, ensuring that they take the requisite time to maintain competitive tension amongst bidders and undertake due diligence with a view to securing the maximum return for creditors.
17 The Administrators have secured temporary funding of the administration from NAB through existing overdraft arrangements but are confident that a further funding agreement with NAB will shortly be concluded. The further funding agreement is anticipated to make provision for the whole of the administration.
18 The Plaintiffs expect that a sale or restructure of the S&W Business is a reasonable possibility although the value range and possible return to creditors is unclear at this point. The primary purpose of the application is to permit sufficient time to enable finalisation of funding arrangements to permit the S&W Business to continue to trade pending completion of the Sale Process, completion of the Sale Process itself and thereafter preparation of a report for the Second Meetings.
19 In his third affidavit Mr Anderson says that the timing of this application has been dictated by two things. First, the need to review and assess the NBIOs in order to conclude that there is a proper basis to progress the Sale Process and thus to extend the time during which the Companies continue under Administration. Secondly, time is needed by the Administrators to engage with NAB to secure NAB's consent to ensure the extension of the Convening Period and to provide funding of the administration during the extending period of the administration.
20 The evidence before me demonstrates that the Administrators have been appropriately proactive in bringing this application forward in a timely manner.