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Quickflix Limited (Administrators Appointed) (ASX:QFX)

Updated

1. What has happened?
On 26th April 2016, the Directors of Quickflix Limited appointed Dermott McVeigh, Wayne Rushton and Morgan Kelly from Ferrier Hodgson as Voluntary Administrators to the company.

On 6th May 2016 at a meeting of creditors Jason Tracy and Richard Hughes from Deloitte were appointed Voluntary Administrators in place of Ferrier Hodgson.

2. Why did this happen?
Quickflix has been endeavouring to secure new capital to strengthen the company and provide new content for customers. . One of the impediments to raising new capital is a Redeemable Preference Share (RPS) held by Stan Entertainment Pty Ltd, a company owned by Nine Entertainment Co and Fairfax Media Limited.

The redeemable preference shares were originally issued to global content provider HBO in March 2012 for an investment of $10 million at the same time that Quickflix entered a commercial relationship with HBO.

In July 2014, Nine Entertainment Co acquired the RPS from HBO for an undisclosed amount.

The RPS ranks ahead of ordinary shareholders with respect to dividends and capital returns. Whilst from a legal perspective it constitutes equity, accounting standards have required it to be recorded as current debt on the Company’s balance sheet.

The face value of the RPS is presently $11,730,549. Stan can only ask for redemption of the RPS in limited circumstances, and as previously advised, the Company is not in a position to fund redemption. The existence of the RPS held by Stan is a significant disincentive for new investors.

3. Can I still use Quickflix?
Yes, all of our streaming and DVD rental services are still operating on a business as usual basis, under the control of the Voluntary Administrator. For subscribers, you should not notice any difference to your streaming service.

4. I am an Australian Quickflix streaming subscriber, what does this mean for me?
The Administrators intend to operate the business on a ‘business as usual’ basis during the period of Administration. This means that you will still have full access to the full range of exciting content on the Quickflix streaming platform, including Star Wars Episode 7, and Colin Farrell’s new film, The Lobster.

The Administrators will maintain Quickflix normal billing procedures.

5. I am a Quickflix DVD Delivery subscriber, what does this mean for me?
As with the streaming business, the Administrators intend to operate the business on a ‘business as usual’ basis during the period of Administration. This means that you will still have full access to the full range of exciting DVD and Blu-ray content. The Administrators will maintain Quickflix’s normal billing procedures.

6. I am a Quickflix NZ subscriber, what does it mean for me?
Quickflix New Zealand operates through its New Zealand subsidiary and is not subject to the Voluntary Administration process. Quickflix NZ continues to trade unaffected by the process in Australia.

7. I am a shareholder in Quickflix. How am I affected?
As you will be aware, the Company’s shares were suspended from trading on the ASX on 31st August 2015 in order to put in place a restructuring programme.

The shares will remain suspended during the period that the company is under the control of the Voluntary Administrators.

In order to be reinstated to the ASX, the company will need to ensure that it has sufficient capital and meets the listing requirements and is approved by the ASX.

At this point in time, it is not possible to say when or if this will occur.

8. Is there likely to be any new content released in the near future?
Quickflix is regularly adding new content to its service.

9. Is Quickflix going to continue operating?
The Administrators are managing the Company on an ongoing basis. The Directors are assisting the Administrators with their efforts in order to provide a seamless service to members.

The Directors are also working towards submitting a Deed of Company Arrangement (DOCA) aimed at restructuring the Company so that it is in a financially strong position to attract new investors and grow the product offering and subscriber base of the company.

The Directors believe that this will hopefully put Quickflix in a position to provide an even better service in the future.

10. What is the Redeemable Preference Share mentioned in the ASX announcement?

In March 2012, Quickflix issued Redeemable Preference Shares (RPS) to HBO for an investment of $10 million at the same time that Quickflix entered a commercial relationship with HBO.

A RPS is a form of security that is treated as both debt and equity in different circumstances. The redeemable nature of the RPS means that in limited circumstances, the holder can seek to have the RPS repaid in cash, similar to the repayment of debt. The RPS issued to HBO in 2012 only allows for redemption to be payable out of profits or capital raised for the purpose of repaying the RPS.

The RPS also provides the holder with the ability to convert the RPS into Ordinary Shares in the company. In this circumstance, there would be no repayment to be made, however the number of shares on issue would increase, based on the conversion price of 15 cents per share.

11. Why is Stan mentioned when the RPS was issued to HBO?

In July 2014, Nine Entertainment Co acquired the RPS from HBO for an undisclosed amount. It subsequently transferred the RPS to a subsidiary, Stan Entertainment Pty Ltd, a company it owns with Fairfax Limited.

The RPS ranks ahead of ordinary shareholders with respect to dividends and capital returns and whilst from a legal perspective it constitutes equity, accounting standards have required it to be recorded as current debt on the Company’s balance sheet. The face value of the RPS is presently $11,730,549.

Whilst Stan can only ask for redemption of the RPS in limited circumstances, as previously advised the Company is not in a position to fund redemption and the existence of the RPS held by Stan is a significant disincentive for new investors.

 

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