Administrators recommend liquidation for Kleenmaid GroupDOWNLOAD
Contact: Johnny Sollitt-Davis (media enquries only)
Corporate Affairs & Communications
Joint Administrators of the Kleenmaid Group John Greig, Richard Hughes and David Lombe have presented their report to creditors dated 14 May 2009.
Deloitte Partner, John Greig said, “Unfortunately there is no good news for employees, customers, suppliers or creditors of the Kleenmaid Group. The financial position of the Group is worse than we initially expected.”
Date of Insolvency & Insolvent Trading
“Kleenmaid’s most recent financial statements indicate a significant net asset deficiency in excess of $82m. This deficiency was evident from June 2007, if not before, at which time the net asset deficiency was approximately $20m,” said Mr Greig.
“Our investigations have revealed evidence of Kleenmaid’s cash flow difficulties since at least June 2007 which confirms our initial view expressed at the first meeting of creditors, that the Group could not possibly have such a significant deficiency by reason of events that occurred in the weeks preceding our appointment as Administrators,” Mr Greig added.
Mr Greig continued, “If it can be proven that the Directors have breached their duty to prevent the Kleenmaid Group from continuing to trade whilst insolvent, then they may be held to be personally liable for the unpaid debts of the Kleenmaid Group. Whilst our investigations to date have been exhaustive, they are preliminary and at this stage we consider that a potential claim against the Directors for insolvent trading could potentially be the net asset deficiency of the Kleenmaid Group at the date of our appointment, which stands at $82.1m.”
“However, at this stage we are not in a position to form a view regarding the likely recovery by liquidators for a claim for insolvent trading as this would require further investigation if appointed by creditors at the forthcoming meeting,” said Mr Greig.
Deed of Company Arrangement
Mr Greig continued, “To date, the Directors have not provided us with a proposal for a Deed of Company Arrangement (DOCA). We understand from Mr Andrew Young this will be forthcoming later this week. This left us with no other alternative than to recommend in our report to creditors that the Kleenmaid Group be wound up”.
“It is still too early to say with any certainty what the outcome will be for former Kleenmaid employees who are owed $3m. Should creditors resolve to wind up the Kleenmaid Group then it is likely that the employees will be entitled to apply to the General Employee Entitlements and Redundancy Scheme (GEERS) which may pay the outstanding monies due to employees excluding superannuation,” Mr Greig said.
Key findings of the investigation:
“This has been a very time consuming and complex administration involving many thousands of disgruntled customers, suppliers, and creditors based around the world.”
“With 4,500 consumers affected, huge interest has been attracted from the public with more than 10,000 individual creditor enquiries in the days following our appointment. In the last couple of days, more than 7,000 copies of the 190 page creditors’ report have been posted to creditors. Throughout our investigation, we have been in regular contact with key stakeholders including the Australian Securities and Investments Commission (ASIC) and various Offices of Fair Trading and the Queensland State Government.”
Potential sale of EDIS Service Logistics
During the Administration process, EDIS Service Logistics Pty Ltd has continued to trade in order to affect a sale of the business as a going concern to various parties that have expressed an interest. The business provides spare and replacement parts for Kleenmaid appliances.
“We’ve had a number of serious expressions of interest which have progressed to the due diligence stage, however, it remains uncertain what the outcome may be.”
“All other aspects of the business previously operated by the Kleenmaid Group ceased upon our appointment.”
As previously announced there is a significant deficiency in the value of stock held to the value of stock that had been ordered and paid for by customers. The Administrators have also established that the actual finished goods stock held is relatively old and primarily is not what had been ordered by customers.
Current creditor position
There is approximately $102m owed to creditors of the Kleenmaid Group which primarily comprises the following:
If the creditors vote to wind up the companies, the Administrators may become liquidators whose primary duties will be:
If appointed as liquidators, Mr Greig intends to apply for funding from the ASIC Assetless Administration Fund to cover the further costs.
Second meeting of creditors
The second creditors meeting is taking place 25 May at 10am at The Mercure Hotel, 85-87 North Quay, Brisbane.
There will be a press conference held following the creditors meeting but media will not be allowed into the meeting itself.
Creditors who are unable to attend the meetings in person may dial into a teleconference or view the meeting via a web-cast. (More details available at www.deloitte.com\au\kleenmaid)
A full copy of the report to creditors can be downloaded here.
NB: For further general information on the voluntary administration process, please refer to: Australian Securities and Investments Commission website
About Kleenmaid Group
The Kleenmaid Group was founded in 1985 and is one of the few distributors to sell kitchen and laundry appliance products direct to the public. The group had a turnover of $90 million in the year to June 2008. Headquartered in Maroochydore, Queensland Kleenmaid has 20 retail outlets located in QLD, NSW, VIC, SA and WA, of which 15 are franchised and five are wholly owned by the company.
In addition, there is a warehouse facility in which stocks of finished appliances are kept pending sale, a spare parts business, as well as 30 franchisees providing in-home service throughout Australia.
Administration time line
9 April 2009 at 4pm – Voluntary Administrators John Greig, Richard Hughes and David Lombe appointed to Kleenmaid Group. All 150 staff terminated upon appointment and five Kleenmaid owned shops closed, some franchisees continue to sell floor stock but no new orders are made from suppliers by the Administrators.
20 April 2009 – Administrator John Greig confirms that based on Kleenmaid terms of conditions customers who have paid for new Kleenmaid appliances will not be receiving any goods as ownership of the goods does not pass to customers until they have been paid for in full and have been delivered to the customer.
Warehouse provider, DB Schenker confirms it is owed $2.1m and have claimed a ‘warehouseman’s lien’ over the $2.9m worth of stock held by them. Mr Greig confirms that even after satisfying the warehouse providers claim there will be little if any stock available to satisfy the secured and unsecured customer claims, estimated at $27.6m and $27m respectively.
23 April 2009 – Creditors' meeting held in Brisbane where Mr Greig confirms that the available assets of the Kleenmaid Group will not provide any return to unsecured creditors.
25 May 2009 – Second creditors' meeting to be held in Brisbane where the Joint Administrators will recommend Kleenmaid Group is wound up.
The appointment of the Voluntary Administrators applies to 14 separate entities in the Kleenmaid Group including:
|Company||Australian Company Number|
|Kleenmaid Corporate Pty Ltd||ACN 125 837 943|
|Lifestyle Appliance Corporation Pty Ltd||ACN 125 839 189|
|Lifestyle Appliance Sales Pty Ltd||ACN 125 842 131|
|Kleenmaid Property Pty Ltd||ACN 125 839 849|
|EDIS Service Logistics Pty Ltd||ACN 077 845 151|
|Kleenmaid Customer Solutions Pty Ltd||ACN 115 837 726|
|Bizco Retail Pty Ltd||ACN 123 492 811|
|Kleenmaid Holdings Pty Limited||ACN 051 042 749|
|KM Intellectual Reserve Pty Ltd||ACN 125 842 024|
|Orchard KM Pty Ltd||ACN 001 905 808|
|Kleenmaid Retail Pty Ltd||ACN 077 845 179|
|Manlyvale Pty Ltd||ACN 116 604 767|
|Kleenmaid Pty Limited||ACN 125 841 858|
|Kleenmaid Appliances Pty Limited||ACN 127 973 086|