Onterran creditors approve deed of company arrangement
Written on the 7 June 2019 by David Simmons
Following its failed attempt to transform the Couran Cove Island Resort on Stradbroke Island Onterran's (ASX: OTR) creditors have approved a deed of company arrangement (DOCA).
At a second creditor's meeting yesterday the administrators of Onterran passed a resolution that the company should execute a DOCA.
David Clout and Patricia Talty, Onterran's administrators, have been appointed as the deed administrators.
The two are currently arranging for the company to execute the DOCA which must occur within 15 business days after yesterday's meeting.
The DOCA follows a debacle which saw Onterran fall into voluntary administration.
The Couran Cove Island Resort was supposed to be a gold mine for Onterran, with $95 million expected to come through for the company, but it quickly deteriorated.
Citing a lack of capital to make the asset truly successful, the group announced the $17 million sale of Couran Cove's holding company Island Resorts to a subsidiary of Sydney boutique property group EDG Capital back in March.
The sale means Onterran has given up the rights to develop or manage the property or run its associated business, but the company still owns 80 apartments on the site.
The DOCA will determine what the company will do with these properties at Couran Cove that it still owns.
Onterran claims to have needed around $7 million to $10 million in capital to harness the potential of the resort, where in mid-2016 it had initially slated substantial development plans for 220 houses.
At the time the board forecast the project would generate more than $95 million in revenue over the ensuing four years with executive chairman Lachlan McIntosh highlighting "significant upside potential".
Just three months before Onterran went into a trading halt which morphed into a suspension that has been extended numerous times over the past two years, the company announced it was accelerating development at Couran Cove with plans for glamping cabins and an eco precinct.
The company used the upcoming Commonwealth Games as an indicator of property market strength to underpin the expedited development project, to be backed by a $6 million share repurchase plan.
The offer was due to close on 21 December, 2016, but shareholders were given an extra day to acquire extra stock. The extension was to little avail though, as only $2.2 million was raised.
Nonetheless, Onterran assured the market this would be sufficient - along with an "accelerated apartment sale program" - to make developments proceed.
But red flags appeared again in mid-January 2017, when Onterran cancelled close to 91,000 redeemable convertible preference shares that were issued in error. Less than a month later on 10 February a trading halt was announced.
Four days later that trading halt became a voluntary suspension pending an announcement which wasn't to come until 28 April - Onterran's subsidiary construction company Bloomer was calling in voluntary administrators.
It wasn't until August of that year that the details of a DOCA for Bloomer were released, involving payments of more than $1.2 million required from Onterran. Since then there have been departures of a few key executives, and very few signs until last week of how the company would get out of its bind.
Further details about Onterran's DOCA are expected to be revealed in the coming days.
Business News Australia
Author: David Simmons