Quintis to face class action

Embattled sandalwood grower Quintis has been hit with a shareholder class action by Sydney firm Bannister Law.

Sandalwood grower Quintis has been hit by credit downgrades

Embattled sandalwood grower Quintis has been hit with a shareholder class action by Sydney-based firm Bannister Law which claims that investors in the company, whose shares have been suspended for nearly four months, have suffered losses of more than $120 million.

Quintis has been locked in talks with note holders owed $US250m ($315m) on a recapitalisation plan but its efforts could be complicated by the spectre of the legal action that is being funded by JustKapital.

The company was hit by credit downgrades this month after failing to make interest payments but has agreed a conditional forbearance agreement with a majority of noteholders, led by US fund manager BlackRock, until March.

The class action claims that shareholders were hit by losses due to inadequate disclosure obligations ahead of the company’s 77.5c share price plunge in May.

The company was already facing skittish investors after a controversial report in March by Californian hedge fund Glaucus Research, which claimed the company was a worthless Ponzi scheme.

Bannister Law solicitor Milan Cakic said more than 100 shareholders had already registered for the class action, which centres on Quintis’ alleged failure to disclose that Nestle subsidiary Galderma terminated a long-term supply contract with it in mid-December but it did not disclose the move until early May.

Mr Cakic noted that the 158 million shares traded between December 16 last year and May 10 may be argued to have suffered losses of 77.5 cents apiece. On that basis the quantum of losses could exceed $122m.

The class action alleges that the announcement of Galderma’s contract termination triggered the share price fall.

Quintis shares were suspended from trading on May 15, and the company has since relied on waivers from noteholders to survive.

In June, Quintis said the termination of the contract with Galderma was not considered to be price sensitive information because “the supply agreement with Galderma did not contain fixed or minimum quantities of supply and therefore Galderma had no obligation to acquire Quintis’ oil”.

It said that oil sales to Galderma contributed 1.5 per cent to total sales revenue in fiscal 2014 and 2.5 per cent of total sales revenue in fiscal 2015. This meant that “volumes and monetary value” of the sale of East Indian sandalwood oil to Galderma were “not in themselves material” and not receiving subsequent orders was not “in itself” price sensitive information, it added.

But lead plaintiff on the class action, Andrew Wyma, said he bought shares in Quintis based on the company’s reports. “At its peak, my shares were worth more than $20,000. Now they’re down to just over $7,000 and are still frozen in the trading halt. It’s not looking promising,” he said.

“I assessed Quintis as a value stock based on external sources as well as the company’s reports — which I thought I could trust.

A spokesman for Quintus told The Australian yesterday the company was yet to be notified by Bannister Law that the class action had been lodged.