Some information relevant to item 6 status of new unit buyers. On 13 June there was a minute passed:
After a lengthy discussion, considering all the points raised, the group decided to move ahead with selling the available units, understanding that legal and interest costs will need to be on top of this. We also agreed to change the legal documents so that those coming in are full shareholders. Stephen Edge was asked what the best way was of making the necessary changes in documentation, and this was his response:
I have been in touch with our lawyers and the advice I’ve received is not straight forward. The current security arrangements have been structured in such a way that did not contemplate possible purchaser changes. To “swap out” an existing purchaser is possible but it will require a lot of legal work and hence cost. I’ve copied below some of the information I have received from our lawyer below:
“The legal context is made more complicated by the fact that UCOL absolutely assigned its rights under each presale to KB, and notice was given to each existing purchaser.
It is possible (if risks are acceptable to KB) to draft documentation (which will be complicated and hence not cheap) which ultimately has the effect of “swapping” the outgoing purchasers for the incoming purchasers.
If KB wants to be co-operative (but avoid too much complication), a possible approach is as follows:
1. As per standard general terms of sale, each SPA includes “and/or nominee”. Hence each purchaser has a contractual right to nominate a third party to complete the purchase. Where a nomination takes place, it is common legal practice to enter into a nomination deed which gives effect to the nomination in favour of the “incoming purchaser” and addresses issues arising as between outgoing and incoming purchasers including, e.g. indemnities between the “outgoing purchaser” and the “incoming purchaser”.
1. You will recall that under the presale SSA, each purchaser signed acknowledgements (see example attached). If a nomination takes place, the ASP itself does not change. Each SAP will be subject to KB’s existing rights (as per the attached notice and acknowledgement). Rather than go through the whole process again (unwind the old and do again), a new form of notice and acknowledgement similar to the attached could be used (by which the incoming purchaser acknowledges BK’s rights and agrees to be bound) if a nomination takes effect.
1. Part of the agreed UCOL security arrangements was that each purchaser provided a limited guarantee and indemnity. New deeds will certainly have to be put in place with each incoming purchaser. It is a commercial decision for KB as to whether or not to release an existing guarantor and, if so, on what terms.
1. Any rearrangements would require agreement from all parties (including the existing guarantors) to the new arrangements proposed. Hence even the less complicated versions will still be time-consuming.
There may be other aspects that need to be addressed, but in my opinion the above is appropriate in the circumstances.”
A ball park legal fee estimate from our lawyer might be $5,000 to $8,000 + GST + disbursements plus UCOL’s lawyer will need to be involved as well.
The more simple approach is to sign up the new purchasers and get them to pay good size deposits and then the exiting parties settle with them contemporaneously at settlement time.
If the Group would still like to move forward and change the purchasers now can I suggest you ask your lawyer to write to me formally requesting this to happen and to outline how they see the documentation needed being dealt with. Your lawyer may have an alternative approach that might be acceptable to Kiwibank, bearing in mind the total security structure currently in place.
Regards,
Stephen
*Stephen Edge *
Senior Manager Property Finance
*DDI *07 571 3846 | *M *027 8395 057 | *F *07 571 3845
*www.kiwibank.co.nz http://www.kiwibank.co.nz/ *
Kiwibank Limited, Level 1, 41 The Strand, P O Box 13333, Tauranga 3110
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