Retail Adventures Pty Ltd (Administrators appointed) Update following first creditors’ meetingDOWNLOAD
8 November 2012: Deloitte Restructuring Services Partners Vaughan Strawbridge, David Lombe and John Greig were appointed Joint Voluntary Administrators of Retail Adventures Pty Limited on 26 October 2012.
Retail Adventures is Australia’s largest discount variety store operator and operates nationally under four brand names – Crazy Clark’s, Sam’s Warehouse, Go-Lo and Chickenfeed.
The Voluntary Administrators held the first meeting of creditors in Sydney, Melbourne and Brisbane yesterday, where more than 300 creditors were provided with information regarding the financial position of the company. The role of the Voluntary Administrator going forward was also explained.
Vaughan Strawbridge said the purpose of a Voluntary Administration was to maximise the chances of a business continuing to exist or, if this was not achievable, providing for a better return to creditors.
“Retail Adventures has incurred significant losses over the last three years,” he said. “Operating costs were too high to be supported by the level of sales being generated and this was obviously not sustainable.
“In order to preserve value in the business, retain jobs and maximise the return to all creditors, a sale of the business and assets of the company as a going concern is the most desirable outcome.
“Key to achieving this is a licence agreement entered into between the Administrators and DSG Holdings Australia Pty Ltd (DSG) that covers the continuing operation of 236 stores under the Crazy Clark’s and Sam’s Warehouse brands and the employment of around 5,000 people.
“We advised creditors that in the absence of funding to order new stock and trade the business, the licence agreement is the best way to preserve the majority of the business and jobs for approximately 5,000 employees, without eating into the assets otherwise available to creditors.
“Accordingly, we have entered into this licence agreement as we believe it will allow for the best possible outcome for all creditors. DSG has, however, provided funding to the Administrators to maintain service suppliers and rental payments to landlords. Some $7.3 million has already been provided, and relevant purchase orders are now being issued.”
Damien Hodgkinson, restructuring adviser to DSG, said the reason Bicheno Investments Pty Limited (Bicheno) had elected not to appoint a receiver to Retail Adventures, but instead negotiated to license the business to DSG from the Administrator, was to avoid burdening the ongoing business with the additional professional fees of a receivership, which would have run into millions of dollars, funds that could be directed to suppliers.
Mr Hodgkinson also said that DSG had already reached agreement for ongoing supply with a number of major suppliers and received funding support from Bicheno.
“Orders have already been placed and goods are now being delivered to our distribution centres in Victoria and Queensland,” he said.
Mr Strawbridge confirmed that since the appointment of the Administrators, 32 stores outside the licence agreement that were incurring significant losses had either closed, or would close by the end of the month.
DSG has already provided $3 million in funding to the Administrators due to 680 affected employees. All entitlements will be paid before Christmas – to around 400 employees affected by the closure of the 32 stores, and a further 280 who have left other parts of the business.
To allow sufficient time to conduct a sale of business, and for a Deed of Company Arrangement proposal to be formulated, the Administrators are applying to the Federal Court of NSW for an extension of the convening period by 90 days.
Should this be successful, the second creditor’s meeting will take place no later than 28 February 2013.
Detailed investigation into the affairs of the company will also continue.
Advertising for the sale of the business to ascertain interest from prospective buyers will commence shortly, with final offers to be considered in the New Year.
Creditors also yesterday elected a Committee of Creditors representing suppliers, landlords and employees, and with whom the Voluntary Administrators will liaise on a regular basis.
NB: See our media releases and research at www.deloitte.com.au
Follow us – @DeloitteNewsAU