Forterra Trust (formerly: Treasury China Trust)

[propertyinvestor]

This one more undervalued than Dynasty REIT.

[Jamie Diamond]

Very worrying developments since the above post, its quite likely that KBC and NAMA will take action to recover any monies that undervalue the transfer of ownership of the management entity. Treasury Holdings is now defunct and is in the control of liquidators Grant Thornton, and Mr Justice Brian McGovern said there appears to be “a significant issue” that the sale of shares in two Treasury-linked Chinese companies to Jersey-registered company controlled by Treasury co-founder Richard Barrett was “at a significant undervalue” and it seemed to him they were matters for the joint liquidators appointed to wind up the company, as well as for the Director of Corporate Enforcement, the judge said.

[Boon]

Very worrying developments since the above post, its quite likely that KBC and NAMA will take action to recover any monies that undervalue the transfer of ownership of the management entity. Treasury Holdings is now defunct and is in the control of liquidators Grant Thornton, and Mr Justice Brian McGovern said there appears to be “a significant issue” that the sale of shares in two Treasury-linked Chinese companies to Jersey-registered company controlled by Treasury co-founder Richard Barrett was “at a significant undervalue” and it seemed to him they were matters for the joint liquidators appointed to wind up the company, as well as for the Director of Corporate Enforcement, the judge said.

1) TCT is a registered business trust governed by the Business Trusts Act of Singapore.
2) THRE is the Trustee Manager of TCT.
3) TCT is owned by its unitholders and not by THRE. As Trustee-Manager of TCT, THRE holds the assets of TCT on trust for, and for the benefit of, all the unitholders. TCT currently owns and operates the properties of TCT, through a number of project companies in the People’s Republic of China (the “Project Companies”) which in turn are held through a number of intermediate holding companies. Any change of shareholders or shareholding interest in THRE, the Trustee-Manager, will not affect the ownership by unitholders of TCT and its assets. The properties of TCT, including the intermediate holding companies and Project Companies, are solvent and are in compliance with their debt covenants; None of TCT, its intermediate holding companies or the Project Companies has entered into any loans or provided any guarantees to Treasury Holdings or its subsidiaries.
4) THRE is owned by Treasury Holdings China Limited (THCL), a wholly owned subsidiary of Treasury Holdings, which in turn is owned jointly by Richard Barrett and John Ronan.
5) THCL has disposed of the entire issued share capital of THRE to Oriental Management Services Limited, a private company incorporated in Jersey and beneficially owned by Richard Barrett, joint owner of Treasury Holdings. Following the completion of the acquisition, Treasury Holdings shall have no interest, direct or indirect, in the Trustee-Manager. Also Treasury Holdings has no interest in the Units of TCT.
6) Treasury Holdings is in liquidation now.
7) Assuming in the worst case scenario that the liquidator is able to “undo” the sales of THRE from THCL to Oriental Management and subsequently manage to wind-up THRE, so be it. The liquidator could only go after the assets of THRE, but not TCT. In the event that the Trustee Manager had been wound-up, a new Trustee Manager could be appointed according the Business Trust Acts. This could well be better outcome, in my opinion. .

(Vested)

[Nick]

Very worrying developments since the above post, its quite likely that KBC and NAMA will take action to recover any monies that undervalue the transfer of ownership of the management entity. Treasury Holdings is now defunct and is in the control of liquidators Grant Thornton, and Mr Justice Brian McGovern said there appears to be “a significant issue” that the sale of shares in two Treasury-linked Chinese companies to Jersey-registered company controlled by Treasury co-founder Richard Barrett was “at a significant undervalue” and it seemed to him they were matters for the joint liquidators appointed to wind up the company, as well as for the Director of Corporate Enforcement, the judge said.

1) TCT is a registered business trust governed by the Business Trusts Act of Singapore.
2) THRE is the Trustee Manager of TCT.
3) TCT is owned by its unitholders and not by THRE. As Trustee-Manager of TCT, THRE holds the assets of TCT on trust for, and for the benefit of, all the unitholders. TCT currently owns and operates the properties of TCT, through a number of project companies in the People’s Republic of China (the “Project Companies”) which in turn are held through a number of intermediate holding companies. Any change of shareholders or shareholding interest in THRE, the Trustee-Manager, will not affect the ownership by unitholders of TCT and its assets. The properties of TCT, including the intermediate holding companies and Project Companies, are solvent and are in compliance with their debt covenants; None of TCT, its intermediate holding companies or the Project Companies has entered into any loans or provided any guarantees to Treasury Holdings or its subsidiaries.
4) THRE is owned by Treasury Holdings China Limited (THCL), a wholly owned subsidiary of Treasury Holdings, which in turn is owned jointly by Richard Barrett and John Ronan.
5) THCL has disposed of the entire issued share capital of THRE to Oriental Management Services Limited, a private company incorporated in Jersey and beneficially owned by Richard Barrett, joint owner of Treasury Holdings. Following the completion of the acquisition, Treasury Holdings shall have no interest, direct or indirect, in the Trustee-Manager. Also Treasury Holdings has no interest in the Units of TCT.
6) Treasury Holdings is in liquidation now.
7) Assuming in the worst case scenario that the liquidator is able to “undo” the sales of THRE from THCL to Oriental Management and subsequently manage to wind-up THRE, so be it. The liquidator could only go after the assets of THRE, but not TCT. [undefined=undefined]In the event that the Trustee Manager had been wound-up, a new Trustee Manager could be appointed according the Business Trust Acts. This could well be better outcome, in my opinion. .[/undefined]

(Vested)

Hi Boon,

I think a change in ownership of the Trustee-Manager (pt 7) will lead to automatic early redemption of the $59.7 million Convertible Bond. If TCT don't have liquidity to repay, it will be forced to fire-sale something ? Please correct me if I am incorrect.

[freedom]

Boon, it seems that you missed the point.

It is not that the liquidator will go after the asset of TCT. There is hardly any way for the liquidator to do it.

It is about the convertible bonds having conditions about who ultimately owns THRE and the property management company. The reason of the sale to Richard Barrett is to prevent earlier redemption of the convertible bond.

plus, the liquidator can also go after the transaction of sale of TCT units by the TH subsidiaries to Richard Barrett and John Ronan. So there is possibility that TCT units may be forced sale in the market to repay TH's debt.

[lanoitar]

The transfer of THRE to Oriental is likely just to buy time, possibly for the sale of TCT assets to meet Forum's possible demand, if the bond covenant is breached.

In an article in the Irish Times, Barrett was quoted of being aware of the Sect 139 of the Irish Companies Act, where any transfer of assets made by a company that then goes into liquidation could be reversed if it was not done at fair market value. Obviously, he knew that Oriental way underpaid ($2.26m Euro) for THRE relative to the now public Goldman valuation ($31.8m Euro). The chances of the sale being reversed is high.

The same issue surrounds Barrett/Ronan's acquisition of a 9.8% stake in TCT from TH in 2010. NAMA contended then that the sale price of 100k Euro + unsecured loans is daylight robbery, and is seeking to reverse it. This case is still pending.

We now have evidence of Barrett/Ronan trying to cheat their creditors twice. Even if TCT finally remains un-harmed by TH's troubles, long term investors need to question whether it's safe to go to bed with them.

[Boon]

Boon, it seems that you missed the point.

It is not that the liquidator will go after the asset of TCT. There is hardly any way for the liquidator to do it.

It is about the convertible bonds having conditions about who ultimately owns THRE and the property management company. The reason of the sale to Richard Barrett is to prevent earlier redemption of the convertible bond.

plus, the liquidator can also go after the transaction of sale of TCT units by the TH subsidiaries to Richard Barrett and John Ronan. So there is possibility that TCT units may be forced sale in the market to repay TH's debt.

Hi Freedom

Thanks for your concern.

I am fully aware of the bond issues. The amount involved is about SGD 70 million. I do not view the early redemption of the bonds as being a minus. On the contrary, I view it as a plus - if TCT has to divest (not fired-sales) BLP and/or Central Plaza to pay for the bond redemption – doing some divestment at this stage is not a bad thing – it would be even better if some of the sales proceed could be distributed to unit holders.

On your last point, assume that “forced- sale” does happen. Again, I see more plus than minus in this - if the controlling interests in TCT of both RB and JR combined could be reduced below 25% - the less the better.

[freedom]

Boon, it seems that you missed the point.

It is not that the liquidator will go after the asset of TCT. There is hardly any way for the liquidator to do it.

It is about the convertible bonds having conditions about who ultimately owns THRE and the property management company. The reason of the sale to Richard Barrett is to prevent earlier redemption of the convertible bond.

plus, the liquidator can also go after the transaction of sale of TCT units by the TH subsidiaries to Richard Barrett and John Ronan. So there is possibility that TCT units may be forced sale in the market to repay TH's debt.

Hi Freedom

Thanks for your concern.

I am fully aware of the bond issues. The amount involved is about SGD 70 million. I do not view the early redemption of the bonds as being a minus. On the contrary, I view it as a plus - if TCT has to divest (not fired-sales) BLP and/or Central Plaza to pay for the bond redemption – doing some divestment at this stage is not a bad thing – it would be even better if some of the sales proceed could be distributed to unit holders.

On your last point, assume that “forced- sale” does happen. Again, I see more plus than minus in this - if the controlling interests in TCT of both RB and JR combined could be reduced below 25% - the less the better.

If TCT has to divest, why do you think any potential buyer would pay a fair price knowing that TCT is in need of money? Plus, the book value of those properties already on the high side. It may not be a fire sale, but it is difficult for TCT to obtain a fair value.

force sale of TCT units will drive price very low given its very low liquidity. not good for existing unit holders.

[Boon]

Nick,

It has been disclosed by the management that the terms and conditions of the Bonds provide that following the occurrence of a Change of Control in the ownership of THRE, the holder of each Bond will have the right, at such holder’s option to require the Trustee-Manager to redeem in whole but not in part such holder’s Bonds at an amount equal to its accreted face value.

I do not know on the remedies available to the bond holders in the event of default on the part of the Issuer on its bond redemption obligation. The Management has not disclosed any detail so far.

Force sale could be a possibility - if property has been used as collateral. Also, force sale does not necessary equates to “fire-sale”, for well sought after properties such those owned by TCT

[BeDisciplined]

TCT is a business trust? OR is it a stapled REIT and business trust?
Could I say the main return of TCT is when it lists its properties as a REIT/