Twinza Oil Limited (Receivers and Managers Appointed), in the matter of Twinza Oil Limited (Receivers and Managers Appointed) (New Scheme) [2026] FCA 104

This Federal Court decision concerned the first hearing for a new creditors' scheme of arrangement proposed by Twinza Oil Limited, a public company in receivership connected with the Pasca A offshore gas project in Papua New Guinea. Twinza had defaulted to senior lenders, receivers had been appointed, and the company was trying to reduce debt and preserve a path forward for the project.

The important background was that Twinza had already tried a different scheme in 2025. Creditors approved that earlier proposal, but the court later refused final approval after concerns were raised about the position of shareholders and holders of convertible redeemable preference shares, or CRPS. Twinza then returned with a revised structure. In this 2026 decision, Banks-Smith J held that the proposal could proceed to the meeting stage and made orders for the scheme booklet to be sent out and for the creditors' meeting to be held.

Twinza was trying to keep a major project alive while carrying debt it could not service. The court said Twinza had been pursuing the Pasca A offshore gas project in Papua New Guinea for several years. The project was said to be on track to progress to the next phase, but Twinza lacked the funds to continue. Its senior lenders appointed receivers and managers in February 2025 after defaults under the finance arrangements.

By January 2026, Twinza owed certain lenders about US$387 million. Those lenders included Tor Asia Credit Opportunity Master Fund LP and Tor Asia Credit Master Fund LP as Senior Lenders, together with Pacific World Energy Ltd, Henry Edmond Aldorf and Hendale PNG Limited as Other Senior Lenders. These groups together were the proposed scheme creditors.

The company had already been through one failed scheme process. In August 2025, the court had ordered a meeting for an earlier scheme. Creditors approved it by the required majority, but at the later approval hearing objectors claiming interests as shareholders or CRPS holders challenged the proposal. The court held that Twinza had not proved that shareholders had no economic interest that would justify participation in the scheme approval process, and final approval was refused.

That earlier refusal mattered because it showed the problem was not simply whether lenders supported the deal. The court wanted proper evidence and a legally coherent explanation of who had rights or economic interests that needed to be recognised. The earlier hearing also raised, though did not finally determine, arguments about whether the conversion of CRPS to ordinary shares involved an acquisition of property.

After that setback, Twinza negotiated again, including with the former objectors. A new deal was reached. The revised structure changed the treatment of CRPS in a way the court considered significant. Instead of dealing with CRPS holders as potential subordinated claimants under the scheme, the CRPS were to be converted to ordinary shares through an out-of-court process, with the consent of the majority of CRPS holders. Under the revised structure, CRPS holders would hold 10% of the total shares on issue after implementation, while existing shareholders would retain 7% and the scheme creditors would receive 83%.

The debt side of the proposal was also substantial. The scheme would reduce senior debt from about US$387 million to US$30 million, amend the facility arrangements for the remaining debt, reduce interest rates and extend the maturity date. The court recorded that the objective was to provide a sustainable framework for Twinza's continued operations, repayment of senior debt, continuation as a going concern and advancement of the project.

At a first hearing for a scheme of arrangement, the court does not finally decide whether the arrangement should bind everyone. The court instead considers whether the statutory and procedural requirements have been met so that the proposal can go to a meeting, and whether the explanatory statement gives creditors enough information to make an informed decision.

In Twinza's case, that broad task involved several practical questions. The court had to consider whether the formal requirements under the Corporations Act and regulations had been addressed, whether the scheme booklet adequately explained the effect of the scheme and the information material to creditors' decision-making, whether the Senior Lenders and Other Senior Lenders could vote as a single class, whether shareholders, CRPS holders and option holders needed to participate, whether releases and performance risk created any barrier at the convening stage, and whether the court should allow a shortened notice period for the meeting.

The history of the earlier failed scheme was central to this analysis. The court was not looking at the new proposal in a vacuum. It was assessing whether the revised structure and updated evidence had dealt with the concerns that had prevented final approval the first time. That is why the judgment repeatedly refers back to the earlier Twinza decisions and to the changes made in response.

The court also had before it updated evidence from Twinza's executive chair, one of the receivers, a representative of the Senior Lenders and Twinza's solicitors. The scheme booklet included reports from BDO Corporate Finance Australia and RISC dated 5 February 2026. The court said those reports were intended to address evidentiary issues identified in the earlier approval judgment.

Banks-Smith J was satisfied that the jurisdictional and formal requirements for the convening stage had been met. The court accepted that Twinza's solicitors had addressed the required formal matters under Part 5.1 of the Corporations Act and the regulations, and that the scheme booklet as a whole met the requirement to explain the effect of the scheme.

The reasons specifically referred to sections of the scheme booklet dealing with the objects and purposes of the scheme, shareholders, options, List A Creditors, employees, advantages and disadvantages, the overall outcome of the scheme, the proposed amended financing documents and subordination deeds, outcomes for different stakeholder groups, the intentions of the Senior Lenders, who would be bound, expected dividends, the independent expert's report and directors' material interests.

The court also held that the scheme booklet contained information material to creditors' decision-making. The reasons referred to sections dealing with the need for Senior Lenders to obtain advice, support from CRPS holders, the scheme company, conditions precedent, implementation steps, shareholder rights and protections, execution risks, modification of the scheme, the independent expert's report, risks associated with the company, the scheme itself, financial statements and ASIC Form 507.

On class composition, the court accepted that the Senior Lenders and Other Senior Lenders had a sufficient community of interest to form a single class. That was important because class composition can be a major issue in schemes. If groups with materially different rights or interests are forced into one class, the process can be vulnerable.

The revised treatment of shareholders, CRPS holders and option holders was also important. On the basis of the BDO opinion, the court said it was apparent that shareholders had no economic interest such that their consent to the scheme was required. As to CRPS, the court noted that unlike the earlier proposal, their claims were not being treated as potential subordinated claims under the scheme. Instead, under varied CRPS instruments, the rights and entitlements to hold CRPS had been substituted with a right to share in a 10% allocation of ordinary shares upon implementation. The issue that had complicated the earlier scheme therefore no longer arose in the same way.

There remained one category of subordinated claim relating to options held by a former employee and by the partner of a former consultant. The court accepted, for the purpose of this application, that those option holders could be considered to have subordinated claims. Although the options were to be extinguished under the scheme, the court accepted the valuation evidence that the option holders had no economic interest in an external administration that would justify participation.

The court also dealt with other practical issues. It accepted that deed polls and related arrangements adequately addressed performance risk, particularly in relation to foreign entities. It noted that the scheme included releases in favour of scheme creditors, directors and officers of Twinza and related obligors, and that the scheme booklet disclosed the inclusion and breadth of those releases. The court said there was no reason in principle why such releases could not form part of a scheme, but also noted that the issue was one for consideration at the scheme meeting and might need further attention at any later approval hearing.

ASIC had confirmed that it did not consider the scheme raised Chapter 6 avoidance issues and that seven days was enough time for ASIC's review, particularly because of the similarities with the earlier proposal. ASIC did, however, raise concern about the short period between dispatch of the scheme booklet and the meeting. The court accepted the period was short, but held it had power to abridge the standard notice period and considered it appropriate to do so in the circumstances.

The orders made on 12 February 2026 set out a detailed timetable. The scheme meeting was to be held at 12.00 pm AWST on Tuesday, 24 February 2026 at FTI Consulting in Perth and electronically. Twinza, by the receivers, was required to dispatch the scheme booklet to each scheme creditor on or before 13 February 2026 by both hard copy and email using the notice details in the syndicated facility agreement as amended.

The court also required Twinza to send notices to CRPS holders, shareholders and option holders who had provided contact details, informing them of the scheme and directing them to Twinza's website. Information about the scheme and a link to access an electronic copy of the scheme booklet were also to be uploaded to the website, subject to confidentiality terms.

Proxy forms were due by 12.00 pm AWST on Sunday, 22 February 2026. The court also ordered publication of notice of the later approval hearing in The Australian on or before 5 March 2026. The proceeding was adjourned and relisted for 10 March 2026 for the hearing of any application under s 411(4) and s 411(6) for approval of the scheme.

Importantly, the court also made a restraint order under s 411(16), restraining further proceedings in any action or civil proceeding against Twinza except by leave of the court. That kind of order can be commercially significant because it helps preserve the restructuring process while the scheme is being put to creditors and, if approved by them, brought back for court approval.

Most businesses will never run a Federal Court scheme of arrangement, but the case is still a practical lesson in restructuring discipline. Twinza's problem was not just over-indebtedness. It also had a layered capital structure involving secured lenders, shareholders, CRPS holders and option holders. The court's response shows that when a business tries to reset debt and ownership, every class of rights has to be mapped carefully.

If your company has preference shares, convertible instruments, options, side letters, subordination deeds or unusual investor rights, those documents can become central in a distress scenario. A court, investor or creditor may ask whether a particular group should vote, whether it still has economic value, whether its rights are being altered directly or indirectly, and whether the explanatory materials are clear enough. If those issues are not dealt with early, a transaction can be delayed or fail.

This case also shows the value of redesigning a transaction after a failed attempt. Twinza did not simply rerun the same proposal. It negotiated with former objectors, changed the treatment of CRPS, relied on updated expert material and came back with a revised allocation of equity. That is often the real commercial work in a restructure. If a process fails because of a structural issue, the answer may be to change the structure, not just argue harder.

Another practical point is disclosure. The court paid close attention to what the scheme booklet said about the scheme's purpose, implementation steps, risks, outcomes for each stakeholder group, expected dividends, financial statements and directors' interests. Even outside a formal scheme, businesses planning a recapitalisation or investor compromise should expect that clear written disclosure will be essential.

For directors, founders and investors, this decision suggests a practical checklist before pursuing a scheme or similar recapitalisation. First, identify exactly which debts and securities are being compromised and which are intended to remain untouched. Twinza's proposal expressly carved out employees, ordinary course trade creditors and certain project counterparties. That kind of precision matters.

Second, test whether any shareholder, preference shareholder or option holder may still claim a real economic interest. If so, you may need to address participation rights, valuation evidence or a different transaction structure. Third, consider whether any rights can or should be dealt with outside the scheme process by consent, as happened with the CRPS conversion here. Fourth, make sure the explanatory materials are detailed enough to withstand scrutiny from creditors, ASIC and the court.

The judgment was delivered on 12 February 2026 and the reasons were published on 16 February 2026. The orders convened a meeting for 24 February 2026 and listed a later approval hearing for 10 March 2026. This page does not state whether the scheme was ultimately approved at that later hearing.

Readers should therefore treat this case as authority on the convening stage of the revised Twinza scheme, not as confirmation of the final result of the restructuring. If you need to know whether the scheme ultimately took effect, you should check for any later judgment or orders dealing with approval under s 411(4).