With an asset of the significance of the Basslink undersea electricity transmission cable linking Tasmania and the Australian mainland, it’s not difficult to imagine how a labyrinth of competing interests might have foiled the best efforts of the receivers appointed to the infrastructure group in November 2021 to effect a sale.
That the receivers were charged with doing so can be in no doubt but as Federal Court judge Jonathan Beach heard this week, not only had the receivers not been able to flog this critical piece of infrastructure but they were in fact no longer capable of retaining their appointment, the court being told that new receivers were to be appointed imminently.
The revelations were aired during an application brought on Monday by Basslink administrators Adam Nikitins, Stewart McCallum and Colby O’Brien.
The EY trio were seeking approval for a further extension to the convening period for the second meeting of Bassklink creditors because, as the court heard, they needed yet another six months to either sell, restructure or recapitalise the group.
Of course, the administrators were in an unenviable position in that without a further extension they were faced with the necessity to hold the second meeting by no later than May 23 or be in default of the court’s first extension orders made last December.
Yet while they were the ones coming to court cap in hand for another chance, the group’s affairs have for all intents and purposes been under the control of the same receivers whose failure to get a sale away precipitated the need for a second extension in the first place.
Counsel for the administrators Sam Rosewarne told the judge: “The current receivers didn’t consumate a sale and they’re soon to be replaced”.
Justice Beach helpfully mentioned that the new receivers would be from FTI Consulting.
Rosewarne also implied that the outgoing receivers – Peter Gothard, Brendan Richards and Peter McCluskey of KPMG – had refused to cooperate fully with the administrators to the point of refusing them access to the books and records.
iNO’s sources have hinted however that there is no bad blood and indeed, Gothard and McCallum are old mates and former Ferrier Hodgson alumni.
Perhaps it boiled down to the fact that receiver are generally in control and cooperation that isn’t absolutely necessary or required is inherently risky.
What there is however are as many layers of complexity as there are reefs and shoals in the Bass Strait through which the troubled inter-connector runs.
Since the cable failed in 2015 Basslink has been embroiled in disputes with security holders State of Tasmania and Hydro Tasmania.
Arbitration of those disputes resulted in orders in 2020 that the company pay the State and Hydro Tasmania some $38.5 million in compensation.
There are also the other secured creditors in the mix, most notably pipeline owner APA, which has adopted a positively hedge fund-like posture inits pursuit of a loan-to-own strategy that has yet to succeed.
Then there are the separate legal proceedings commenced by the outgoing receivers in respect of the termination by Hydro Tasmania of the Basslink Services Agreement in February.
On the upside the court did hear that the EY threesome and the new appointees from FTI would be moving forward in a spirit of cooperation, though how that will differ in practice from the spirit that existed between the EY trio and their KPMG counterparts is anyone’s guess.
Time will tell but ultimately the incumbent administrators and new receivers – who are being appointed by APA – must move forward in circumstances where APA is also a prospective purchaser of Basslink and, surprise surprise, APA appeared on Monday opposing the application for an extension of six months, arguing three months was sufficient.
What better way to relieve the competitive tension the administrators are duty bound to generate than by inhibiting the capacity of rivals to complete due diligence.
The EY trio in the meantime must take into account all 59 of Basslink’s creditors, some of whom are also likely to be potential buyers.
It must be said of course that the EY trio have to some extent been compensated for their trouble via the payment by Basslink of a $1 million indemnity to contribute to professional fees and expenses associated with the conduct of the administrations.
It might even be enough to fund yet another extension application, not that his honour would be happy to entertain such, warning on Monday that any future application to further extend the convening period must come before him at first instance.
““If I give them six months they’re unlikely to get a third extension,” Justice Beach warned.