Cash sweep dispute enrages creditors’ trust beneficiary

No quarterly cash sweep means no happy beneficiaries of the Wiluna Mining Company Limited (WMCL) creditors’ trust and there’s no beneficiary less happy than ex-WMCL chairman Milan Jerkovic.

“Mr Ryan, Ms Warwick, Mr Francis, and Mr Woodhouse both in their capacities as deed administrators and trustees despite requests being made have failed to provide information about, amongst other things, the way the average cash balance has been calculated to enable one to determine whether the WMC Group has complied with its obligations in respect of the Cash Sweep.”

Already defending civil penalty proceedings brought in April this year by ASIC in respect of a botched June 2022 capital raising, the West Australian mining veteran this week commenced proceedings in the Supreme Court of West Australia seeking an inquiry into the conduct of the administration and orders for the appointment of special purpose administrators (SPAs).

WMCL was placed into administration in 2023 with FTI Consulting foursome Michael Ryan, Kate Warwick, Ian Francis and Daniel Woodhouse appointed.

A resolution to accept a deed of company arrangement (DoCA) was passed by a vote of creditors in July of that year.

Stinging Jerkovic into action has been what he claims in his originating process is the absence of any payments to the beneficiaries of the WMCL creditors’ trust and the apparent refusal of the FTI four to explain why. To him.

According to Jerkovic’s interpretation of the WMCL DoCA and creditors’ trust, the companies subject to the DoCA are required to pay any cash over a defined threshold at the end of each quarter to the creditors trust for distribution to the beneficiaries.

At the heart of the dispute seems to be the apparent failure of the DoCA entities to have generated, at any time during the administration, quarterly cash balances sufficient to trigger those payments via what is described as a “Cash Sweep”.

“Since the execution the Wiluna DOCA and the Wiluna Creditors’ Trust Deed there have been no Cash Sweeps and, other than an initial distribution that was provided for in the Wiluna DOCA, no distributions to beneficiaries of the Wiluna Creditors’ Trust have occurred,” Jerkovic said.

“Mr Ryan, Ms Warwick, Mr Francis, and Mr Woodhouse both in their capacities as deed
administrators and trustees despite requests being made have failed to provide information
about, amongst other things, the way the average cash balance has been calculated to enable
one to determine whether the WMC Group has complied with its obligations in respect of the
Cash Sweep.”

In a statement FTI’s head of communications Cameron Morse told iNO: “We intend to defend the Jerkovic Proceeding. We do not anticipate this action will impact the Deed Administrators’ current recapitalisation efforts and will provide a further update in due course.”

To try and understand Jerkovic’s claim we pulled a Form 5022 Warwick lodged with ASIC last month.

It confirms creditors approved payment of almost $1 million for past remuneration but is less explicit in respect of a $100,000 cash sweep generated in 2024 which “has now been transferred to the Wiluna Creditors’ Trust (WCT) to address remaining trustee remuneration and facilitate a final equalising distribution to participating creditors”.

In addition to orders for an inquiry, Jerkovic also wants the deed administrators to explain how secured creditor Mercuria came to be repaid, the reasons why, and to provide details of the post-DOCA financing arrangements, including the terms and conditions of the post-DOCA funding that the Deed Administrators have obtained.

Jerkovic’s originating process make no reference to first ranking secured creditor Byrnecut, which Warwick identified in the September 18 ASIC lodgement as being supportive and as having provided “a revised debt structure that supports the turnaround strategy being pursued by the Deed Administrators”.

In addition to his concerns around the formula used to determine quarterly cash balances Jerkovic is also impugning the administrators’ independence because they are “acting as deed administrators of
the creditor companies who owe the debt referred and are the parties to whom the debt is owed, which debt they hold on trust for the beneficiaries of the Wiluna Creditors’ Trust”. He also wants them removed as the trustees of the creditors’ trust.

Waiting in the wings to conduct any investigation the court might order are aspiring SPAs Jeremy Nipps and Daniel Juratowitch from Cor Cordis.

Jerkovic has also obtained a consent from Sheridans‘ Jennifer Low, presumably to act as replacement trustee.

The matter will come before the court on October 21.