We are now in a position to convene the second meeting of creditors in order to determine the Company s future.

Transcription

1 6 October 2017 To Creditors Dear Sir/Madam Austradia Pty Limited (Administrators Appointed) (the Company) ACN As you are aware, James Stewart, Jim Sarantinos and I were appointed Administrators of the Company on 24 May 2017 pursuant to Section 436A of the Corporations Act 2001 (the Act). We are now in a position to convene the second meeting of creditors in order to determine the Company s future. Please find enclosed the Administrators report to creditors pursuant to Section 439A(4)(a) of the Act, which includes our opinion, with supporting reasons, on each of the following matters: Whether it would be in the creditors' interests for the Company to be wound up; or Whether it would be in the creditors' interests for the administration to end. The following documents in respect of the second meeting of creditors of the Company are attached to the report: Report annexure B C D Document Notice of meeting of creditors (form 529) Appointment of proxy (form 532) Formal proof of debt (form 535) Description The meeting will be held on 18 October 2017 at 10:30 am. You should arrive for registration by 10:15 am. This form enables you to appoint a person to act on your behalf at the meeting. Proxy forms submitted at the first meeting of creditors are not valid for this meeting. A person is not entitled to vote unless they provide particulars of the debt or claim to the Administrators before the meeting. If you submitted this form for the purposes of the first meeting of creditors, you do not need to submit another form unless you seek to amend your claim. All creditors must furnish full details of their claims, indicating whether they rank as secured, preferential or unsecured, and whether they claim title to any goods supplied or any lien over goods in their possession which are the property of the Company. \B09\va164 - Cover letter to Creditors - s439a report_ _11_06.docx

2 To Creditors 6 October 2017 Page 2 Report annexure E F Document Remuneration Approval Request Report Australian Restructuring, Insolvency and Turnaround Association (ARITA) Creditor Information Sheet Description Details of time spent by category of staff at the applicable rates. A summary of the work undertaken by the Administrators and their staff. A summary of the likely tasks and estimated remuneration of the Deed Administrators and Liquidators, should creditors resolve that the Company be wound up. Contains information regarding offences, recoverable transactions and insolvent trading, which may be pursued if the Company is placed into liquidation. Creditors should review the ARITA information sheet in conjunction with section 8 of the Administrators report. The proof of debt and proxy forms should be lodged with this office before the meeting and, in any event not later than 4.00pm on the day prior to the meeting. Forms can be sent by facsimile on (02) marked to the attention of Candice Ferreira or scanned and ed to Candice.ferreira@fh.com.au. However, Corporations Regulation A requires lodgement of the original of the proxy form with the Administrators office within 72 hours of lodging the faxed / ed copy. Should you have any questions regarding the administration or the enclosed report, please do not hesitate to contact Candice Ferreira of this office on (02) Yours faithfully Austradia Pty Limited Ryan Eagle Administrator Encls. \B09\va164 - Cover letter to Creditors - s439a report_ _11_06.docx

3 Austradia Pty Limited (Administrators Appointed) ACN Report by Administrators pursuant to Section 439A of the Corporations Act October 2017 Ferrier Hodgson is an affiliation of independent partnerships/entities Liability limited by a scheme approved under the Professional Standards Legislation Level 25 One International Towers Sydney 100 Barangaroo Avenue Sydney NSW 2000 GPO Box 4114 Sydney NSW 2001 P F E. sydney@fh.com.au ferrierhodgson.com

4 Contents Section Page Statement by Administrators 2 Glossary of terms 3 1 Executive summary 5 2 Introduction 9 3 Company information 13 4 Historical financial position 19 5 Report as to affairs and director s reasons for failure 24 6 The Administration to date and asset sale process 29 7 Statutory investigations 32 8 Voidable transactions 39 9 Estimated return to creditors Administrators opinion Recent changes to the Act Further information and enquiries 45 Annexures 46 A Receipts & Payments from 24 May 2017 to 30 September B Notice of meeting of creditors 48 C Appointment of proxy 50 D Proof of debt 53 E Remuneration Approval Request Report 55 F ARITA creditor information sheet 70 1

5 Statement by Administrators In reviewing this Report, creditors should note: This Report is based upon our preliminary investigations to date. Any additional material issues that are identified subsequent to the issue of this Report may be the subject of a further written report and/or tabled at the Second Meeting. The statements and opinions given in this Report are given in good faith and in the belief that such statements and opinions are not false or misleading. We reserve the right to alter any conclusions reached based on any changed or additional information which may be provided to us between the date of this Report and the date of the Second Meeting (except where otherwise stated). In considering the options available to creditors and formulating our opinion and recommendation, we have necessarily made forecasts of asset realisations and total creditors claims based on our best assessment in the circumstances. These forecasts and estimates may change as asset realisations progress and we receive creditor claims and consequently the outcome for creditors might differ from the information provided in this Report. Creditors should consider seeking their own independent legal advice as to their rights and the options available to them at the Second Meeting. 2

6 Glossary of terms Term ACN Description Australian Company Number Act Corporations Act 2001 Administrators APAAP Arcadia ARITA ASIC ATO Code James Stewart, Ryan Eagle and Jim Sarantinos All present and after-acquired property no exceptions Arcadia Group Ltd and its related entities Australian Restructuring, Insolvency & Turnaround Association Australian Securities & Investments Commission Australian Taxation Office ARITA Code of Professional Practice COC Committee of Creditors or Committee of Inspection (post 1 September 2017) Company Deloitte Directors Directors Statement DIRRI DOCA EBITDA ERV FEG Austradia Pty Ltd (Administrators Appointed) Deloitte Financial Advisory Pty Ltd David Raymond Slade, Hilton Seskin, Patrick Francis Elliott and Richard William Amos Directors Statement received on 19 June 2017 pursuant to section 438B of the Act Declaration of Independence, Relevant Relationships and Indemnities, pursuant to s436da of the Act and the Code Deed of Company Arrangement Earnings Before Interest, Tax, Depreciation and Amortisation Estimated Realisable Value Fair Entitlements Guarantee First Meeting First meeting of creditors held on 5 June 2017 FY Greensill Hilco Financial year Greensill Capital (UK) Limited Hilco Merchant Australia Pty Limited ILRA Insolvency Law Reform Act 2016 IPS LFL LTM Management Insolvency Practice Schedule (Corporations) Like for like Last 12 months The senior management of the business (including the NAL senior management team) 3

7 Term Myer NAL PILN PMSI PPSA PPSR PwC RATA Report ROT Second Meeting Secured Lender TSTM YOY YTD Description Myer Pty Limited Next Athleisure Pty Limited Payment in lieu of notice Purchase Money Security Interest Personal Property Securities Act 2009 (Cth) Personal Property Securities Register PricewaterhouseCoopers Report as to Affairs This report, prepared pursuant to Section 439A of the Act Retention of title Second meeting held pursuant to Section 439A of the Act, where creditors determine the future of the Company. Commonwealth Bank of Australia Topshop / Topman Year on year Year to Date 4

8 1 Executive summary This section addresses frequently asked questions relating to the Administration including a summary of the estimated outcome for creditors. Full details are available throughout this Report. Question What is the Company? Austradia Pty Ltd was the trading company for the Topshop and Topman brands in Australia. The Company was established in 2011 and operated as a retailer of men s and women s apparel, footwear and accessories. The Company traded the brands through a franchise agreement with the UK based Arcadia group. Arcadia is the owner of the TSTM brands and operates over 620 stores across 40 countries. At the date of our appointment, the Company operated 9 standalone stores and 17 Myer concessions throughout Australia, together with an online store. The business employed over 750 employees and represented one of Arcadia s largest international TSTM franchises. What is the purpose of this Report? The purpose of this Report is to table the findings of our investigations of the Company s business, property, affairs and financial circumstances, as well as our opinion on the options available to creditors in deciding the future of the Company at the Second Meeting. What is the current status of the Company? James Stewart, Ryan Eagle and Jim Sarantinos were appointed Administrators of the Company on 24 May Following our appointment, we assumed control of operations and responsibility for the management of the business. We then conducted an urgent financial and commercial review and commenced communications with key stakeholders. We immediately identified the need to right size the business (including a phased downsizing of the head office function) to ensure its ongoing viability. In early June 2017, the Administrators reached an agreement whereby Arcadia purchased all remaining inventory within the business as at 9 June At the same time, we entered into a licence agreement with Arcadia to trade-on the business until employees could be transferred to Arcadia and leases could be assigned. Subsequently, five standalone stores were closed, together with all 17 Myer concessions and the online store. The Sydney Gowings, Bondi, Melbourne Emporium and Brisbane stores remain open. Arcadia took control of the business and remaining four stores on 3 September 2017 following the transfer of certain employees and go forward store leases. 5

9 Shareholder Related person Share class Ownership Julisa Pty Ltd Hilton Seskin Ordinary 25.5% Myer Ltd N/A Preference 20.0% What is the ownership structure of the Company? D Slade Nominees Pty Ltd David Slade Ordinary 20.0% Next Capital (Services A) Pty Ltd N/A Ordinary 16.8% Next Capital (Services B) Pty Ltd N/A Ordinary 16.8% Antell Nominees Pty Ltd Patrick Elliott Ordinary 0.8% Luckett Nominees Pty Ltd Scott Luckett Ordinary 0.1% What were the Company s trading results / net asset position FY15 Audited accounts $000s FY16 Draft statutory accounts $000s FY17* Management accounts $000s Revenue 72,808 84,944 92,430 Net profit / (loss) 675 (2,867) (4,854)** Net assets 2, (2,284) Standalone stores Myer concessions *Note: The FY17 management accounts have been prepared to May 2017 with the June 2017 forecast being incorporated into an 11+1 forecast. **Note: FY17 management accounts present EBITDA Why do the Directors believe the Company became insolvent? The Directors of the Company have provided the following reasons for its failure: Unfavourable franchise agreement with Arcadia including high franchise fees resulting in high product costs; Significant international freight forwarding costs; Counter seasonal product issues due to the Arcadia stock-push franchise model; High costs of doing business due to large store footprint with insufficient sales to meet these costs; Ongoing commitments from Arcadia to operational changes to the franchise model were not delivered; and Delayed introduction of domestic online store in March

10 What were the underlying causes of the Company s failure? In addition to the issues identified by the Directors, we consider the reasons for the Company s failure also include: The impact of competing brands (including Zara and H&M) taking market share; The Company employing a rapid growth strategy while LFL sales were declining which impacted profitability; Sub-optimal inventory quality and stock mix, impacted by the franchise agreement with Arcadia; and The Company being unable to offer price points which appealed to the target customer base, impacted by the high costs associated with the franchise agreement. When do the Administrators believe the Company became insolvent? It is our preliminary view that the Company was insolvent from at least 24 May 2017 due to Arcadia advising on this date that they were unwilling to provide further financial support which was requested by the Company on 18 May On receipt of this advice from Arcadia, and with a lack of any other alternative and immediate funding options, the Directors resolved to appoint Administrators later that day. For further information, please refer to Section 7.6. What was the outcome of the asset sale process? On appointment, we commenced negotiations with Arcadia in respect of an inventory sale. Arcadia owned all intellectual property relating to the brands and was therefore the only buyer. In early June 2017 we entered an agreement whereby Arcadia purchased all remaining inventory in the business for $5.3 million (plus GST). Prior to accepting the offer, we engaged Hilco (an independent stock valuation and realisation specialist firm) to provide a comparison of the offer versus the estimated net proceeds from a stock liquidation process. Subsequent to this transaction, leases for Sydney Gowings, Bondi, Melbourne Emporium and Brisbane were transferred to Arcadia together with 194 employees. This transaction resulted in the return of bank guarantees to the Secured Lender totalling $1.5 million and a saving in employee entitlements (PILN and redundancy) of $0.4 million. What is the purpose of the Second Meeting? To resolve the future of the Company. The options available to Creditors are that: The Administration should end (and control revert back to the Company s directors); The Company be wound up; or The Company execute a Deed of Company Arrangement (DOCA) (although we note that a proposal of this kind has not yet been received). What is the estimated return to creditors? We estimate that the dividends payable to each class of creditor are as follows: Creditor class Estimated dividend rate (cents in the $) Estimated timing Priority Employees 100 cents October 2017 Secured 33 to 39 cents* Q to H Unsecured N/A N/A *Note: Inclusive of return of bank guarantees and letter of credit Please refer to Section 9 for further information. 7

11 What do the Administrators recommend creditors should do? It is our opinion that the Company should be placed into liquidation. No DOCA proposal has been received and ending the Administration is not a viable option due to the insolvency of the Company. What claims will a liquidator investigate? Whilst we have considered the underlying causes of the Company s failure, our investigations into claims arising from those matters are not complete. The Administrators have undertaken a preliminary analysis regarding a potential claim which the Company may have under the terms of the franchise agreement with Arcadia. The Administrators have not formed a view as to the likely prospects of such a claim. At this stage, we have not identified any further significant claims that may be recoverable for the benefit of creditors generally. However, further and more detailed investigations will be undertaken by a future liquidator, if appointed. The investigations undertaken to date in the Administration are detailed at Section 7 of this report. Where can I get more information? If you require any further information, please see the Ferrier Hodgson website and/or contact: Candice Ferreira Phone: (02) tscreditors@fh.com.au 8

12 2 Introduction This section provides information on the entity subject to the administration process, the objectives of the Administration, the purpose of this Report, details of meetings of creditors and a summary of the Administrators remuneration. Appointment of Voluntary Administrators James Stewart, Ryan Eagle and Jim Sarantinos were appointed as joint and several Administrators of the Company on 24 May 2017 by the Directors pursuant to Section 436A of the Act. On appointment, we assumed control of the Company s operations and notified employees, creditors and other stakeholders of our appointment. We then conducted an urgent financial and commercial review of the Company with the assistance of key personnel and stakeholders including customers and suppliers. Objective of voluntary administration In a voluntary administration, Administrators are empowered by the Act to assume control of an insolvent company, superseding the powers of the directors and officers, to manage the company s affairs and deal with its assets in the interests of its creditors. The intention of a voluntary administration is to maximise the prospects of a company continuing in existence or, if that is not possible, to achieve better returns to creditors than would be achieved by its immediate liquidation. During a voluntary administration there is a moratorium over most pre-administration creditor claims. Administrators are also required to investigate the Company s affairs and report to creditors on the Administrators opinion as to which outcome of the voluntary administration process is in the creditors best interest, informing the creditors prior to their voting at the Second Meeting (please see Section 10 for further details). Purpose and basis of this Report Section 439A(4) requires an administrator to provide a report to all creditors ahead of the Second Meeting, outlining: Details regarding the business, property, affairs and financial circumstances of the entity under administration; The Administrators opinion and recommendation on each of the options available to creditors; and If a DOCA is proposed, the details of the DOCA. This Report also informs creditors about the preliminary investigations undertaken by the Administrators to date. Accordingly, the views formed in this Report are not final and may be subject to change. Any additional material issues that are identified subsequent to this Report may be subject to a further written report and/or tabled at the forthcoming Second Meeting. This Report has been prepared primarily from information obtained from the Company s books and records and discussions with Management and the Directors. Although the Administrators have conducted certain investigations of the affairs of the Company, there may be matters which we are unaware of as an audit of the Company has not been undertaken. In order to complete our Report, we have utilised information from: The ASIC; The PPSR; The Company s book and records; Discussions with the Directors of the Company; Discussions with Management and key employees of the Company; Discussions with the shared service provider, NAL; and Discussions with creditors of the Company. 9

13 Declaration of independence, relevant relationships and indemnities In accordance with Section 436DA of the Act and the Australian Restructuring, Insolvency & Turnaround Association (ARITA) Code of Professional Practice, a Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) was enclosed with the Administrators first communication to creditors (and tabled at the First Meeting). The DIRRI disclosed information regarding the Administrators independence, prior personal or professional relationships with the Company or related parties and any indemnities received in relation to the appointment. This assessment identified no real or potential risks to the Administrators independence. There has been no change in the declaration since that time. First Meeting of Creditors and Committee of Creditors Section 436E of the Act requires the Administrators to convene the first meeting of creditors within eight business days of being appointed. The First Meeting was held on 5 June 2017 at which time our appointment was confirmed. Creditors resolved at the First Meeting to appoint a COC whose members are as follows: COC member Commonwealth Bank of Australia Deborah Jollie (as a representative of the Company s employees) Greensill Capital (UK) Ltd Imagebox Group Pty Ltd Nexus CIFS Ltd Toll Global Forwarding Pty Ltd Topshop Topman Ltd Representative Tim Dellit Deborah Jollie* Scott Butler (McCullough Robertson) Dominic Bonello Wil Honner (PwC) Ruth Ahern Phil Hollinshead (Deloitte) *Deborah Jollie has since resigned from the COC, with Carl Baker (Gowings store manager) attending in her absence. The matters discussed at the COC meetings and the resolutions passed by the COC are summarised in the following table. Meeting date Matters discussed Resolution passed 22 June 2017 Receive and consider an update from the Administrators on the progress of the Voluntary Administration to date. None To consider and discuss an extension of the convening period. 22 September 2017 To consider, and if appropriate, appoint replacement members to the COC. To receive and consider an update from the Administrators on the progress of the Voluntary Administration to date. To consider and, if appropriate, approve remuneration of the Voluntary Administrators. That the remuneration of the Administrators as set out in the Remuneration Approval Request Report dated 19 September 2017 for the period from 24 May 2017 to 31 August 2017 be fixed in the amount of $1,351, plus any applicable GST and may be paid. 10

14 Extension of convening period On 22 June 2017, we applied to the Federal Court of Australia to extend the convening period for the Second Meeting. The objective of this application was to provide sufficient time to exhaust all options in relation to the sale of the business and continue negotiations with Arcadia to maximise recoveries for creditors. Pursuant to Section 439A(6) of the Act, the Federal Court of Australia granted an extension of the convening period for the Second Meeting with the meeting to be held no later than 3 January A copy of the sealed order can be found on our website at Second Meeting of Creditors Pursuant to section 439A of the Act, the Second Meeting is convened for 10:30 am on 18 October 2017 at the Grace Hotel, 77 York Street, Sydney NSW On the basis that no DOCA proposal has been received to date, the creditors will decide the future of the Company by voting on one of the following options: That the Administration should end and control of the Company revert to its directors; or That the Company should be wound up. The Notice of Meeting of Creditors (Form 529) is attached as Annexure B along with an appointment of proxy form (Annexure C) and a proof of debt or claim form (Annexure D). Creditors who wish to participate in the Second Meeting must complete and submit the following forms to this office by 4:00pm on 17 October Form Appointment of proxy (form 532) Comments Corporate creditors must appoint an individual to act on its behalf. Individuals voting in person are not required to complete this form but must complete this form if a representative is appointed to vote on their behalf. Please note that proxy forms submitted for the First Meeting are not valid for the Second Meeting. A new proxy form must be submitted. Proof of debt (form 535) Creditors must submit documentation to support the amount they have claimed (i.e. unpaid invoices, payslips). Creditors who have already submitted a proof of debt are not required to resubmit a proof of debt form unless the amount claimed has changed. Remuneration An administrator s remuneration can only be fixed by resolution of a COC, the Company s creditors, or by application to the Court. In accordance with Section 449E of the Act and the ARITA Code, a Schedule of Remuneration Methods and Hourly Rates were provided to creditors with our initial communication and tabled at the First Meeting. ARITA has issued an Approving remuneration in external administrations information sheet providing general information for creditors on the approval of an administrator s fees in a liquidation, a voluntary administration or a DOCA. This information sheet is available from the ARITA website ( 11

15 At the COC meeting held on 22 September 2017, the following remuneration was approved: Meeting date Remuneration period $ 22 September May 2017 to 31 August ,351, Total 1,351, Note: Remuneration excludes disbursements and GST A summary of previously approved remuneration together with remuneration we will be seeking approval for at the Second Meeting is as follows: Remuneration previously approved by COC 1,351, $ Remuneration to be approved at Second Meeting of Creditors Voluntary Administration 1 September 2017 to 30 September , Voluntary Administration 1 October 2017 to 17 October , Liquidation (if applicable) 18 October 2017 to completion 180, Estimated total remuneration 1,859, Note: Remuneration excludes disbursements and GST Please refer to our Remuneration Approval Request Report at Annexure E for details of the key tasks undertaken throughout the course of the administration to date. Non-disclosure of certain information There are sections of this Report where we have considered it inappropriate to disclose certain information to creditors. Such information includes: Valuations of specific assets / inventory; Details of offers received during the asset sale process; Commercially sensitive information relating to the Company s key operating agreements; and Commercially sensitive prospective financial information (for example, projections / forecasts). We recognise the need to provide creditors with complete disclosure of all necessary information relating to the Company. However, where we believe certain information is commercially sensitive and it is not in creditors interests the information has not been disclosed at this stage. During consultations with the COC, we have disclosed such information as required to COC members to ensure that they are fully informed. 12

16 3 Company information This section provides creditors with information on the history of the Company and the circumstances leading up to the appointment of Administrators. Company structure Background The Company s core business was the operation of TSTM standalone stores and Myer concessions in Australia. TSTM are the foundation brands of Arcadia, a British multinational fashion retailer of clothing, shoes, makeup and accessories which operates a franchise business outside of the UK. The Company entered a franchise agreement with Arcadia in August 2011 which granted the Company exclusive rights to open and operate stores in Australia. At the date of our appointment, the Company operated 9 standalone stores, 17 Myer concessions and an online store. The Company represented one of Arcadia s largest international franchises of Topshop and Topman. The Company initially experienced relative success and strong trading performance given they entered the market ahead of a number of other well-known international fast fashion brands such as Zara and H&M. Despite a strategy which saw the Company s retail channel grow significantly over the past two years, operating performance and EBITDA has declined steadily during this period. The deterioration in profitability is due to a number of factors including the high cost base, a lack of appropriate seasonal product for the Australian market, issues with local pricing points and a lack of online presence for the majority of the Company s trading history (with the online store only launching in March 2017). 13

17 Business locations At appointment, the Company operated 9 leasehold standalone stores and 17 Myer concessions. Stand-alone store Myer Concession The Company operated from a head office located in Sydney CBD where the management, buying, merchandising, planning and digital teams were based. The Company shared the premises with NAL (an entity associated with several of the Company s shareholders), which provided shared services relating to HR, payroll, finance and IT. The Company did not operate a centralised warehouse, with stock being delivered directly to each of the Company s retail stores and concessions. The Company did, however, lease a warehouse in Sydney which was used as a storage and distribution facility for the Gowings store. Arcadia franchise agreement The Company entered a franchise agreement with Arcadia in August As franchisor, Arcadia was responsible for supplying inventory to the market, while the Company was responsible for selling and store operations. The key terms of the franchise agreement were as follows: The Company had exclusive rights to open stores and use TSTM trademarks for the purposes of operating its business in Australia. Arcadia was required to use reasonable endeavours to supply (at the Company s cost) adequate quantities of appropriate products from their available range. The Company had the ability to collaborate with Arcadia in relation to product planning, however Arcadia reserved the right to decline any orders made by the Company. The Company was required to pay a franchise fee on the cost of the product purchased which was charged as a percentage of the landed cost price of the stock supplied. Following the deterioration of the Company s financial position, this fee was reduced on several occasions. Outside of the franchise agreement, the business purchased approximately 10% of its inventory from third party suppliers. 14

18 Myer services and support agreement In September 2015, the Company entered a services and support agreement with Myer. This agreement outlined plans for 22 concession openings from November 2015 to February Under this agreement, weekly sales (net of a turnover based support charge) were remitted to the Company. At the date of our appointment, the Company operated 17 concessions. At the same time, an agreement was entered whereby Myer acquired 25% of preference equity in the Company from NAL. Consideration for the purchase of these shares was in the form of: 1. Upfront consideration of c. $6.3 million; 2. Funding of capital expenditure relating to the rollout of Myer concession stores capped at c. $2.8 million; and 3. Deferred consideration of up to c. $4.8 million, the payment of which was dependent on the financial performance of the Company. We understand that this deferred amount was not paid by Myer. NAL infrastructure and services agreement The Company operated under an agreement whereby NAL provided several essential support service functions including human resources, payroll, finance and IT. All head office operating costs, including rent and IT related costs were incurred by NAL and reimbursed by the Company at cost. Company history and events leading up to the administration Set out below is a summary of the events leading up to our appointment as Administrators of the Company. Date August 2011 December 2011 October 2012 April 2015 December 2014 June 2015 January 2017 September 2015 November 2015 Event Arcadia franchise agreement executed. First store opened on Chapel Street in Melbourne. Opening of further standalone stores in NSW, VIC, QLD and WA. Greensill (a supply chain finance company) provided a $5 million unsecured facility which extended the Company s credit terms with Arcadia by a further 120 days. Arcadia agreed to reduce the franchise fee for certain standalone stores. Services and support agreement and share purchase agreement entered with Myer. Company refinanced existing secured facilities with the Secured Lender with credit limits of $16.7 million. As a condition of the refinance, Greensill agreed to subordinate its debt. Arcadia provided Company with 1 million credit facility backed by a letter of credit issued by the Secured Lender. July 2016 Following breaches of certain banking covenants in March 2016, a standstill agreement was entered into expiring on 31 October This standstill was extended on several occasions with the last such extension expiring on 28 April Following this date, discussions continued with the Secured Lender. Conditions of the July 2016 standstill included requiring the Company to participate in a future equity raising and receiving additional financial support from Arcadia. 15

19 August 2016 November 2016 May 2017 An additional 2.6 million of unsecured credit and a mark down contribution of 0.3 million was provided by Arcadia. In return, the Company and Arcadia committed to make several operational changes aimed at improving the performance of the business. Potential equity raising discussed with Arcadia, with Company submitting the first proposal on 12 December As part of these discussions Arcadia communicated their intention to continue to support the business. 30 November 2016 The Company undertook an equity raising via the issue of 128,040 fully paid ordinary shares to existing shareholders with an issue price of $15.62 per share. Myer did not participate in this process resulting in their shareholding reducing to 20%. The $2 million raised was used to repay some of the secured facilities. January 2017 Additional 1.5 million of trade credit was provided by Arcadia, together with a further reduction in the franchise fee. 25 January 2017 Ferrier Hodgson engaged by the Secured Lender to undertake a strategic business review of the Company s business and financial forecasts. 30 January 2017 Appointment of Jamie Kristow as CEO. February 2017 to May 2017 Management conducted a detailed review of business and development of turnaround plan, including ongoing discussions with key stakeholders regarding proposed operational changes and funding requirements. As part of this process: The Company and Arcadia documented the turnaround strategy; and Arcadia engaged Australian based financial advisors to assist with restructuring negotiations. March 2017 Launch of domestic TSTM online store. 3 May 2017 Ferrier Hodgson further engaged by the Secured Lender to monitor ongoing financial and operational performance of the Company. 18 May 2017 The Board requested funding of $6.4 million (of which $2 million was required immediately) from Arcadia to enable the turnaround plan to be executed. 24 May 2017 Arcadia advised the Company that they were not willing to provide any further financial support. Directors resolved to immediately appoint Voluntary Administrators. 16

20 Statutory information Statutory details for the Company extracted from ASIC s national database at the time of our appointment are summarised below. ACN Incorporation date 10 June 2011 Registered address / principal place of business Level 3, 80 George Street, Sydney NSW 2000 Source: ASIC Name Role Appointment date Resignation date David Raymond Slade Director 10 June July 2017 Hilton Seskin Director 10 June June 2017 Patrick Francis Elliott Director 1 December June 2017 Richard William Amos Director 22 December June 2017 Mark Woodhouse Secretary 10 July August 2017 Source: ASIC A search of the National Personal Insolvency Index maintained by the Australian Financial Security Authority shows that the Company s directors are not bankrupt or subject to a Personal Insolvency Agreement under Part X. The ASIC database discloses the Company s shareholders to be: Registered Owner Shares held Description Fully paid Issued Capital Myer Holdings Ltd 128,025 Preference Y 20.0% Julisa Pty Ltd 163,402 Ordinary Y 25.5% D Slade Nominees Pty Ltd 128,028 Ordinary Y 20.0% Next Capital (Services A) Pty Ltd 107,588 Ordinary Y 16.8% Next Capital (Services B) Pty Ltd 107,588 Ordinary Y 16.8% Antell Nominees Pty Ltd 5,289 Ordinary Y 0.8% Luckett Nominees Pty Ltd 222 Ordinary Y 0.1% Source: ASIC 17

21 Registered security interests Commencing in January 2012, the PPSA enacted a new nationwide scheme for registration of a security interest over personal property on the PPSR. Security interests arise out of an agreement between a company and a secured party over personal property (excludes land and other limited asset categories) which secures payment of a debt or performance of an obligation. The relevant APAAP security interest held by the Secured Lender against the Company was registered and therefore perfected under the PPSA. A ROT interest, PPS lease or bailment constitute a PMSI under the PPSA and therefore may take priority over the Secured Lender s perfected interest if that interest itself is perfected. The PPSR identified 11 additional security interests over the Company as at the date of our appointment: Collateral class Secured party Registrations Other goods retention of title Accent Group Pty Ltd 1 Other goods retention of title Aqueo Import and Distribution Pty Ltd x 3 3 Other goods retention of title Authentics Australia Pty Ltd 1 Other goods landlord fittings P.T. Limited; Scentre Group Trust 2; and Perpetual Trustee Company Ltd 1 Other goods landlord fittings Perpetual Trustee Company Ltd 1 Other goods leased assets Ricoh Australia Pty Ltd 1 Other goods landlord fittings The Trustee for Scentre Chatswood Trust 1 Other goods landlord fittings The Trustee for The Hawaiian Trust 1 Other goods retention of title Top Shop/Top Man Ltd 1 Source: PPSR searches undertaken on 24 May 2017 A further five claims were received from suppliers relating to ROT or consignment agreements in circumstances were no corresponding PPSR registration was made. Upon receipt of information from secured parties, and any further PPSA claims that were received, a detailed assessment of the registered securities was completed. Where suppliers held valid security interests, their goods on hand were either returned or alternatively, if the goods were used in the ordinary course of business, these goods were paid for during the Administration. Further details of the registered security interests are available to creditors on request. Winding up applications At the date of our appointment, there was no outstanding winding up application against the Company. 18

22 4 Historical financial position This section provides a summary of the financial performance of the Company. Preparation of financial statements For this Report, we have used the audited financial statements for FY14, FY15 and FY16 (in draft form only) and management accounts for FY17. We have reviewed the management accounts and determined that they are generally consistent with the financial statements, except for several non-cash adjustments. Overview of financial performance The Company initially experienced strong sales growth with a positive EBITDA contribution as the standalone store network expanded. From FY15, the Company experienced declining LFL sales volumes despite the continued expansion of standalone stores and Myer concessions. During this period, the cost base also increased leading to a deterioration in EBITDA. Source: Management accounts 19

23 Summary profit and loss A summary of the Company s profit and loss statements is presented below: FY14 $000s FY15 $000s FY16 $000s Revenue standalone stores 48,062 72,808 82,109 Revenue - concessions - - 2,835 Total revenue 48,062 72,808 84,944 Cost of sales (22,630) (33,306) (40,446) Gross profit 25,432 39,502 44,498 Gross profit margin 52.9% 54.3% 52.4% Advertising expense (1,911) (2,739) (3,479) Occupancy expense (5,944) (10,379) (13,707) Employee expenses (11,849) (16,856) (20,073) Depreciation and amortisation (1,527) (3,080) (2,644) Administration expenses (3,688) (4,525) (5,964) Finance expenses (568) (1,041) (1,221) Total expenses (25,487) (38,620) (47,088) Profit before income tax (55) 882 (2,590) Income tax (expense) / benefit (22) (363) 257 Unrealised profit/(loss) on cash flow hedge (214) 157 (533) Net profit / (loss) for the period (290) 675 (2,866) Number of standalone stores Number of Myer concessions Source: Company Annual Reports Key observations: The Company first experienced a significant loss in FY16. This loss was principally driven by a decline in LFL sales in standalone stores, together with increased capital expenditure commitments and occupancy expenses due to further store and concession openings. The Company achieved YOY revenue growth from inception to FY16, underpinned by the opening of additional standalone and concessions. However, LFL sales decreased by 10% and 22% in FY16 and FY17 respectively. With the ongoing expansion of the store network, together with the deterioration of LFL sales, the Company s occupancy expenses as a percentage of sales increased from 12.3% in FY14 to 16.1% in FY16. This movement represented a deterioration in profitability in FY16 of approximately $3.2 million. Other overhead expenses including advertising, employees and administration remained relatively stable as a percentage of sales throughout the period. 20

24 Summary balance sheet Current assets 30 June 2014 $000s 30 June 2015 $000s 30 June 2016 $000s Cash and cash equivalents 2, ,092 Trade and other receivables 902 5,063 1,801 Inventories 5,561 4,755 8,058 Total current assets 9,219 10,492 10,951 Non-current assets Plant and equipment 11,698 13,847 16,419 Deferred tax assets 1,137 1,405 2,334 Total non-current assets 12,835 15,252 18,753 Total assets 22,054 25,743 29,704 Current liabilities Trade and other payables (3,183) (5,196) (11,465) Provisions and current tax liability (670) (841) (1,119) Secured borrowings (10,000) - (9,500) Total current liabilities (13,853) (6,037) (22,084) Non-current liabilities Provisions (2,634) (2,474) (2,203) Secured borrowings - (8,550) - Loans from shareholders (3,875) (6,315) (5,100) Total non-current liabilities (6,509) (17,339) (7,303) Total liabilities (20,362) (23,376) (29,387) Net assets 1,693 2, Source: Company Annual Reports Key observations: The Company maintained a positive net asset position over the period, however this reduced to just $0.3 million at 30 June This was driven by increased liabilities, particularly trade and other payables which increased throughout the period, reflecting the Company s expanding store network and ongoing financial support provided by Arcadia and Greensill. The deterioration in the net asset position across the period was partially offset by increases in inventory and plant and equipment resulting from the expanding store network. 21

25 Management accounts profit and loss We have used the audited accounts in sections 4.3 and 4.4. To outline FY17 results, we have provided the below analysis of the management accounts, budgets and forecasts. The figures below should not be directly compared to the audited financial statements, and should instead be used as reference point, given that interest, tax, depreciation and amortisation have not yet been accounted for in the management accounts. The FY17 management accounts had been prepared to May 2017, with the June 2017 forecast being incorporated into the FY forecast below. FY15 $000s FY16 $000s FY Forecast $000s FY17 Budget $000s Variance to budget $000s Variance to budget % Sales - Standalone 72,808 78,472 68,658 91,566 (22,908) (25.0) Sales - Concessions - 6,472 23,772 37,548 (13,776) (36.7) Total sales 72,808 84,944 92, ,114 (36,684) (28.4) COGS (33,340) (39,696) (45,764) (58,936) 13, Gross profit 39,468 45,248 46,666 70,178 (23,512) (33.5) Gross profit margin 54.2% 53.3% 50.5% 54.3% (3.8%) Other income (35) (55.5) Payroll (15,035) (20,073) (23,835) (27,580) 3, Operating (3,465) (6,594) (6,678) (9,392) 2, Marketing (2,738) (3,479) (2,926) (4,998) 2, Occupancy (10,328) (13,707) (18,109) (22,770) 4, Head office (2,901) Total expenses (34,467) (43,824) (51,520) (64,677) 13, EBITDA 5,002 1,424 (4,854) 5,501 (10,355) (188.2) Source: Management accounts Key observations: In FY17, the Company was tracking to generate an EBITDA loss of $4.9 million, which was $10.4 million below budget. This underperformance was predominantly driven by lower than budgeted sales volumes, negatively impacting gross profit by $23.5 million. FY17 sales were only 9% higher than FY16 despite a further 11 concession stores being opened. The cost reductions implemented by the Company were insufficient to compensate for the decrease in LFL sales. 22

26 Management accounts balance sheet Current assets June 16 $000s May 17 $000s Variance $000s Cash and cash equivalents 1,092 1,052 (40) Trade and other receivables Inventory 8,058 11,020 2,962 Other current assets 1, (883) Total current assets 11,001 13,155 2,154 Non-current assets Plant and equipment 16,369 14,602 (1,767) Deferred tax assets 2,582 2,416 (166) Total non-current assets 18,951 17,018 (1,933) Total assets 29,952 30, Current liabilities Arcadia payable (2,000) (9,176) (7,176) Trade and other payables (5,364) (6,759) (1,395) Greensill facility (2,679) (3,707) (1,028) Secured borrowings (9,500) (6,720) 2,780 Other current liabilities (2,541) 307 2,848 Total current liabilities (22,084) (26,055) (3,971) Non-current liabilities Shareholder loans (5,100) (5,152) (52) Other liabilities and accruals (1,496) (1,249) 247 Total non-current liabilities (6,596) (6,401) 195 Total liabilities (28,680) (32,456) (3,776) Net assets 1,271 (2,284) (3,555) Source: Management accounts Key observations: The Company continued to see a deterioration in its net asset position during FY17 driven by increasing liabilities as Arcadia and Greensill continued to support the Company. The Company saw a further 37% increase in its inventory balance driven by the increased store footprint as Myer concessions opened. The balance of the secured facility decreased as a result of funds from the equity raising being used to partially repay the Secured Lender in November

27 5 Report as to affairs and director s reasons for failure This section provides a summary of the report as to affairs submitted by the Directors, together with a detailed explanation of the Directors reasons for failure of the Company. Report as to affairs Section 438B of the Act requires the Directors to give an administrator a statement about the Company s business, property, affairs and financial circumstances. We received the Directors Statement on 19 June In the Statement, the Directors detailed the Company s assets and liabilities at book value and ERV. The Administrators have not audited the Company s records or the book values. The below schedule should not be used to determine the likely return to creditors as a number of realisable values are based on the Company s records and remain subject to the review of the Administrators and, in particular: The Administrators are not in a position to confirm (or otherwise) certain asset values as they are commercially sensitive and are not disclosed in this Report. The value of creditor claims remains subject to change as further claims may be received and require adjudication. The table below does not provide for trading losses or professional costs associated with the administration process. Further detail on the estimated return to creditors from the administration in contained in Section 9. The following table summarises the assets and liabilities (before costs) disclosed in the Directors Statement: Ref Book Value Directors ERV Administrators Administrators ERV Low ERV High $000s $000s $000s $000s Assets Cash on hand Cash at bank Debtors Inventory ,019 29,000* 9,861 9,861 Plant and equipment , Other assets Total assets 26,359 29,872 10,053 10,284 * Estimate based on retail value in a business as usual scenario and does not consider costs of doing business such as occupancy, payroll and marketing. 24

28 Ref Book Value Directors ERV Administrators Administrators ERV Low ERV High $000s $000s $000s $000s Liabilities Secured creditors ,750 6,750 12,118 12,118 Employee claims ,024 1,840 PMSI claims Unsecured creditors ,117 15,117 16,849 16,849 Shareholder loans ,153 5,153 Contingent liabilities ,112 5, Total liabilities 27,825 27,825 36,251 35,960 Estimated surplus / (deficiency) (1,466) (2,047) (26,198) (25,676) Notes Cash At the date of our appointment, the Company had a total cash balance of $0.1 million comprising of trading bank accounts, a term deposit and cash floats within the stores. Debtors The Directors Statement disclosed an amount of $0.6 million was outstanding at the date of appointment. To date, we have realised $0.1 million. The Company s largest remaining debtor relates to an amount due from Myer relating to net concession sales proceeds for the period 14 to 24 May Myer is claiming a significant offset relating to amounts due under the services and support agreement. We are continuing to assess Myer s claim in this regard. 25

29 Inventory A summary of the cost value of inventory and achieved realisations (before costs) is as follows: Book value $000 s Value realised $000 s Inventory per Directors Statement at 24 May ,019 Add back: Obsolescence provision 1,154 Add back: Clearance stock 825 Revised inventory balance at 24 May ,998 Inventory sales - 24 May 2017 to 8 June 2017 (2,500) 4,611 Sale of remaining inventory to Arcadia (10,498) 5,250 Total inventory realisations 9,861 The Directors Statement discloses an ERV of $29 million. This estimate is based on the current retail price of the inventory in a business as usual scenario and does not take into account costs of doing business such as occupancy, payroll and marketing. Plant & equipment The Company owns plant and equipment including office furniture, warehouse equipment, racking, store fixtures and fittings, IT equipment and a motor vehicle. All equipment situated in the four go forward stores was sold to Arcadia as part of the wider transaction resulting in the transfer of employment for 194 staff. This is discussed further in Section 6. Due to the specific nature and ageing of the remaining fixtures and the estimated removal costs, realisations will be at a significant discount to book value. Other assets The Directors statement discloses an amount of $50,000 relating to a cash deposit account held with the Secured Lender. The Secured Lender has offset this amount and accordingly it is included within the cash balances outlined at Section

30 Secured Lender The Directors Statement includes amounts owing to the Secured Lender classified in two categories as outlined below: Classification in Directors Statement $000s Secured loan Secured creditors 6,750 Bank guarantees Contingent liabilities 3,421 Arcadia Letter of credit ( 1 million) Contingent liabilities 1,691 Total 11,862 The Secured Lender has lodged a proof of debt in the amount of $12.1 million. During the Administration, the Arcadia letter of credit ($1.7 million) and bank guarantees ($1.5 million) have been returned to the Secured Lender which will reduce the Secured Lender s claim in the Administration. Refer to Section 6 for further information. Employee entitlements As a result of the transaction with Arcadia, 194 employees were transferred which resulted in a saving in redundancy and PILN of $0.4 million. Following the completion of the right sizing of the business, employee entitlements totalling approximately $1.8 million will be paid in full in October Administrators ERV Low $000s Administrators ERV High $000s Superannuation Annual leave Long service leave Redundancy / PILN 1,143 1,039 Estimated employee entitlements 2,024 1,840 The variance between the Directors ERV and the Administrators ERV is due to the Directors not accounting for redundancy and PILN. PMSI claims We continue to be in correspondence with one PMSI creditor, claiming approximately $0.1 million. We have recently rejected this claim and are awaiting further correspondence. 27

31 Unsecured creditors A summary of the unsecured creditors is provided below: Directors ERV $000s Administrators ERV $000s Trade creditors 15,117 16,849 Shareholder loans - 5,153 Total 15,117 22,002 The variance between the Directors ERV and the Administrators ERV relates to the claims received from various creditors during the Administration process which were more than the amounts disclosed in the Company s books and records as at 24 May Although shareholder loans have not been disclosed in the Directors Statement, we understand that an amount of $5.1 million is outstanding to various shareholders. Contingent liabilities The Directors have disclosed bank guarantees ($3.4 million) and the Arcadia letter of credit ($1.7 million) as contingent liabilities. These amounts are included as secured creditor liabilities in Section Omissions from statement We have not identified any material omissions from the Directors statement. Directors opinions as to the reasons for failure The Directors of the Company have provided the following reasons for its failure: Unfavourable franchise agreement with Arcadia including high franchise fees resulting in high product costs; Significant international freight forwarding costs; Counter seasonal product issues due to the Arcadia stock-push franchise model; High costs of doing business due to large store footprint with insufficient sales to meet these costs; Ongoing commitments from Arcadia to operational changes to the franchise model were not delivered; and Delayed introduction of domestic online store in March Administrator s opinions as to the reasons for failure In addition to the issues identified by the Directors, we consider the reasons for the Company s failure also include: The impact of competing brands (including Zara and H&M) taking market share; The Company employing a rapid growth strategy while LFL sales were declining which impacted profitability; Sub-optimal inventory quality and stock mix, impacted by the franchise agreement with Arcadia; and The Company being unable to offer price points which appealed to the target customer base, impacted by the high costs associated with the franchise agreement 28

32 6 The Administration to date and asset sale process This section provides an overview of the conduct of the Administration, including the trading of the business and the asset sale process. The business at commencement of the Administration On appointment, the Administrators assumed control of the Company s business. Appropriate controls and systems were put in place with respect to cash / banking, purchase orders, stock control and reporting. Whilst conducting an urgent assessment of the business, we continued to trade in the ordinary course. In particular, we: Assumed responsibility for day to day management of the store and concession network; Set the sales and marketing strategy during the Administration period; Undertook a review and rightsizing of head office function; Opened new accounts with service providers, utilities and other non-stock suppliers; Reviewed major contracts and negotiated terms of trade with various suppliers; Negotiated with NAL in relation to ongoing provision of shared services; Continued employment of staff and attended to employee enquiries and HR issues; Attended to the set up and maintenance of merchant services; Negotiated certain payments of necessity to ensure continued supply of business critical services; Conducted meetings with Directors, senior management and staff; Prepared trading forecasts; Reviewed the procedures for IT services and back up processes for information on site; and Reviewed the adequacy of the insurances policies held by the Company and identified potential issues requiring attention of insurance specialists. The asset sale process Immediately following the appointment, the Administrators entered into discussions with Arcadia who expressed a primary interest in purchasing the inventory of the business, and a secondary interest in potentially acquiring the right to utilise certain leases and to continue to employ certain employees following a rightsizing of the business. In early June 2017, the Administrators reached an agreement whereby Arcadia purchased all remaining inventory within the business as at 9 June At the same time, we entered into a licence agreement with Arcadia to trade on the business until employees could be transferred to Arcadia and leases could be assigned. Under the licence agreement all sale proceeds continued to be received by the Administrators with net proceeds remitted to Arcadia on a weekly basis following the deduction of store operating and head office costs. The following consideration was provided by Arcadia for the inventory: $000s Gross proceeds (ex GST) 5,250 Less: Release of letter of credit (refer to Section 5.1.6) (1,691) Net proceeds from sale of inventory 3,559 29

33 Prior to the acceptance of the Arcadia offer we performed a comparison of that offer versus the estimated net proceeds that could be realised from a stock liquidation process. Whilst estimated net proceeds from a liquidation process were broadly comparable to Arcadia s offer, the following factors were also considered which caused Arcadia s offer, and the subsequent potential for a go-forward business, to be more attractive: The potential transfer of employees to Arcadia, which resulted in a significant reduction in employee entitlement claims; and The potential assignment of leases to Arcadia, which resulted in the return of bank guarantees to the secured lender. Subsequently, five standalone stores were closed together with 17 Myer concessions and the online store. Store Final day of trade Date lease disclaimed Miranda (NSW) 18 June June 2017 Chatswood (NSW) 25 June June 2017 Chapel Street (VIC) 2 July July 2017 Highpoint (VIC) 3 July July 2017 Perth (WA) 9 July July 2017 On 23 August 2017, following a lengthy period of negotiation between Arcadia and certain landlords, we entered a further agreement with Arcadia which resulted in the transfer of four remaining store leases and 194 jobs with Arcadia continuing to operate from the Sydney Gowings, Bondi, Melbourne Emporium and Brisbane stores. 30

34 Trading results The Administrators traded on a business as usual basis during the period from 24 May 2017 to 8 June 2017 while a transaction was negotiated with Arcadia. From 9 June 2017, the stores were traded under licence by Arcadia until formal handover of the four go forward stores on 3 September The Administrators trading receipts and payments for the period 24 May 2017 to 30 September 2017 are summarised below: Administrators' trading period $000 s Arcadia licence period $000's Total Administration $000's Sales 4,556 10,996 15,553 Trading payments Wages and payroll expenses (1,468) (2,317) (3,786) Rent and outgoings (341) (2,169) (2,510) Other store trading costs (831) (934) (1,766) Customs duty - (426) (426) Myer licence fee (192) (43) (235) Shared services (116) (49) (166) Remittance of net amount to Arcadia - (4,094) (4,094) Total trading payments (2,950) (10,033) (12,983) Net realisations from trading 1, ,570 Full particulars of the Administrators receipts and payments are attached as Annexure A. 31

35 7 Statutory investigations This section provides creditors with information on the preliminary investigations undertaken by the Administrators to date, and whether there have been any potential actions identified that may be pursued by a liquidator, if appointed. Nature and scope of review The Act requires an administrator to carry out preliminary investigations into a company s business, property, affairs and financial circumstances. Investigations centre on transactions entered into by the Company that a liquidator might seek to void or otherwise challenge where the Company is wound up. Investigations allow an administrator to advise creditors what funds might become available to a liquidator such that creditors can properly assess whether to accept a DOCA proposal or resolve to wind up the Company. A liquidator may recover funds from certain voidable transactions or through other avenues; for example, through action seeking compensation for insolvent trading or breach of director duties. Funds recovered would be available to the general body of unsecured creditors including secured creditors but only to the extent of any shortfall incurred after realising their security. A deed administrator does not have recourse to voidable transactions. The Administrators knowledge of the Company s affairs comes principally from the following sources: Discussions with the Directors, their advisors and key staff members. The Directors Statement and questionnaire. Management accounts, books and records, board reports and financial statements. The Company s internal accounting system. Correspondence and discussions with the Company s creditors. An independent valuation of the Company's assets. Searches obtained from relevant statutory authorities. Publicly available information. Director and officers responsibilities Sections 180 to 184 of the Act set out the duties, obligations and responsibilities imposed on directors which are designed to promote good governance and ensure that directors act in the interests of the Company. These duties include: Duty of care and diligence; Duty of good faith; Duty not to make improper use of position; and Duty not to make improper use of information. Based on our investigations to date, we have not identified any offences the Directors may have committed under the provisions of the Act. The Company s solvency In order for a liquidator to recover funds through the voiding of certain transactions or through other legal action, such as seeking compensation from directors for insolvent trading, the Company s insolvency must be established at the relevant time. There are two primary tests used in determining a company s solvency, at a particular date, namely: Balance sheet test; and Cash flow or commercial test. 32

36 The Courts have widely used the cash flow or commercial test in determining a company s solvency at a particular date along with several other indicators. We have summarised below the insolvency indicators adopted by the Courts and the ASIC together with our comments in relation to the Company: Balance sheet test Insolvency indicator Indicator present Date relevant to insolvency Administrators comments Working capital deficiency Yes 31 March 2016 The Company recorded the following working capital ratios: Working capital ratio 30 June June June May Due to the November 2015 refinancing, secured debt was classified as a non-current liability in FY15 leading to the increase in the working capital ratio. The secured debt was reclassified as a current liability due to the breach of financial covenants in the March 2016 quarter leading to the working capital ratio dropping below 1 where it remained until our appointment. Net asset deficiency Yes 31 October 2016 The Company recorded the following net asset positions: $000s 30 June , June , June May 2017 (2,284) The Company first exhibited a negative net asset position in October

37 Insolvency indicator Indicator present Date relevant to insolvency Administrators comments Creditors outside of payment terms No N/A At the date of appointment, most trade creditors were within trading terms, except for Arcadia and the international freight provider. Breaches of banking covenants Inability to extend finance facilities Yes 28 April 2017 Non-monetary banking covenants in relation to the secured facility were breached in the quarter ending 31 March Following a period of negotiation, a subsequent standstill agreement was reached effective from 1 April Following several extensions the standstill expired on 28 April 2017 although the Secured Lender continued to be actively engaged in restructuring discussions beyond this date. The Secured Lender s support was further evidenced in March 2017 by the extension of the Arcadia Letter of Credit to 30 June Yes 20 October 2016 The Company operated a 5 million unsecured trade finance facility with Greensill which was subordinated to the Secured Lender. On 20 October 2016, Greensill issued a notice of default following the Company s failure to meet an interest payment obligation ( 0.3 million). The Company commenced negotiations with Greensill regarding an interest only repayment plan although no formal plan was agreed. Inability to meet other financial commitments No N/A We are not aware of any material defaults on any finance or operating lease obligations at the date of appointment. 34

38 Cash flow test Insolvency indicator Indicator present Date relevant to insolvency Administrators comments Profitability / trading losses Yes 30 June 2016 A net loss of $2.9 million was generated in FY16. Whilst audited accounts were not prepared for FY17, a negative EBITDA of $4.9 million was forecast as at 30 June Cash flow difficulties Yes 18 May 2017 Management has advised that cash flow was monitored daily and that regular forecasts were prepared on an ongoing basis. Outside of the liabilities owing to the Secured Lender, Arcadia and Greensill (with whom restructuring negotiations were ongoing), the Company broadly had sufficient working capital to meet day-to-day operating expenses as and when they fell due. From January 2017, the Directors undertook a wide-ranging turnaround project, which included initiatives targeted at reducing wage and occupancy expenditure. During this period, the Company actively engaged in ongoing discussions with key stakeholders including existing equity, Arcadia and the Secured Lender. As part of this process, Arcadia engaged Australian based financial advisors to assist with the restructuring negotiations. A final funding requirement of $6.6 million (of which $2 million was required immediately) was subsequently identified and communicated to Arcadia on 18 May This request was declined by Arcadia on 24 May 2017 leading to the appointment of the Administrators later that day. No access to alternative sources of finance (including equity capital) Inability to dispose non-core assets Yes 18 May 2017 On 30 November 2016, the Company raised an additional $2 million via an equity raising. These funds were used to pay down the Secured Lender in accordance with the standstill agreement. On 15 December 2016, an investment proposal was issued to Arcadia which provided for further credit facilities in exchange for an equity stake in the business. This proposal was not accepted by Arcadia but they did agree to provide additional financial support in the form of a further 1.5 million in trade credit and reduction in the franchise fee. Until 24 May 2017, a major shareholder indicated that it would be willing to contribute up to an additional $1 million, contingent on Arcadia funding being received and amendments being made to the franchise agreement. N/A N/A The Company did not own any non-core assets that it could sell to assist its turnaround strategy. 35

39 Insolvency indicator Indicator present Date relevant to insolvency Administrators comments Dishonoured payments No N/A We are not aware of dishonoured payments. Overdue Commonwealth and State taxes No N/A We are not aware of any payment plans with the ATO or any other government body. The Company had not lodged or paid its April 2017 Business Activity Statement (BAS) at the date of our appointment. We understand all other Commonwealth and State taxes remained current. No forbearance from creditors / legal action threatened or commenced by creditors Yes October 2016 Except for the notice of default issued by Greensill in October 2016, we are not aware of the Company s involvement in any litigation or legal disputes, other than negotiations with suppliers and landlords as would be expected in the ordinary course of business. Preliminary conclusion as to solvency Having regard to the above analysis, it is our preliminary view that the Company was insolvent from at least 24 May 2017 due to Arcadia advising on this date that they were unwilling to provide the requested financial support of $6.6 million. On receipt of the response from Arcadia and with a lack of immediate alternative funding options, the Directors resolved to appoint Administrators. Our preliminary opinion that the Company was solvent prior to 24 May 2017 is based on the following: The business continued to have sufficient cash to make payments to its trade creditors (except Arcadia and Greensill); Since January 2017, Management was undertaking a detailed review of the business and developing a turnaround plan, including ongoing discussions with key stakeholders regarding proposed operational changes and funding requirements; A major shareholder (Next Capital) had confirmed ongoing support in circumstances where an agreement was reached with Arcadia; and Despite the expiry of the standstill agreement with the Secured Lender on 28 April 2017, the Company continued to have the support of the Secured Lender whilst negotiations with Arcadia and the Company s shareholders continued. The Secured Lender s support was further evidenced in March 2017 by the extension of the Arcadia Letter of Credit to 30 June However, the Company may have been insolvent earlier than this due to: Deteriorating financial performance resulted in continued operating losses; Working capital and net asset deficiencies; Breaches of banking covenants; and Inability to repay the Secured Lender, Arcadia and Greensill to terms. A liquidator, if appointed, would need to conduct further investigations to ultimately determine whether the Company became insolvent at 24 May 2017 or earlier. 36

40 Potential liquidator recoveries insolvent trading Directors liability Section 588G of the Act imposes a positive duty upon company directors to prevent insolvent trading. If a director is found guilty of an offence in contravening Section 588G, the Court may order him or her to pay compensation to the company equal to the amount of loss or damage suffered by its creditors. The Court may also impose upon the directors one of two types of civil penalty orders, the first can include a fine or an order prohibiting the directors from participating in the management of a company. The second, where there is criminal intent and conviction, a director could also be imprisoned for up to five years. This action is not a right that is available to an administrator or a deed administrator. Applications for compensation payable to the company are usually made by a liquidator, or in specified circumstances, a creditor. The substantive elements of Section 588G are: A person must be a director of a company at a time when the company incurs a debt; The company must be insolvent at the time or becomes insolvent by incurring the debt; and The director must have reasonable grounds for suspecting that the company is insolvent or would become insolvent. Directors defences The defences available to directors contained in Section 588H are: The directors had reasonable grounds at the time the debt was incurred to expect the company to be solvent and would remain solvent even after the debt was incurred; The directors relied on another competent and reliable person to provide information about whether or not the company was insolvent; The directors were ill or for some other good reason did not take part in the management of the company; and The directors took reasonable steps to prevent the incurring of debt. Pursuing an insolvent trading claim A liquidator must form an opinion as to the date of insolvency and determine the debts incurred from that date; thereby quantifying the loss to the company. The costs of proceeding with an insolvent trading action must be considered. Our preliminary view is that the Company was solvent up until the point at which support from Arcadia was withdrawn. The Directors then resolved to appoint Administrators later that day. A liquidator would undertake an investigation to determine whether there are grounds to pursue an insolvent trading action against the directors on the basis that it was not reasonable for them to believe that Arcadia were at all times willing to provide financial support. In determining a course of action, a liquidator would give consideration to the costs and risks of any proceedings and the ability to fund any proceedings, including whether creditors are prepared to forgo any scheduled dividends and / or the cost of litigation funding as an alternative. We have not assessed the Directors capacity to meet any claims should it be determined that insolvent trading has occurred. Adequacy of books and records Section 286 of the Act requires a company to keep written financial records that correctly record and explain the company s transactions, financial position and performance and would enable true and fair financial statements to be prepared. The financial records must be retained for a period of seven years after the transactions covered by the records are completed. 37

41 The failure to maintain books and records in accordance with Section 286 provides a rebuttable presumption of insolvency which might be relied upon by a liquidator in an application for compensation for insolvent trading. Based on our review of the books and records received, we are of the opinion that the Company s books and records were maintained in accordance with Section 286 of the Act to 24 May Other matters arising from investigations Falsification of books Pursuant to Section 1307 of the Act, it is an offence for a person to engage in conduct that results in the concealment, destruction, mutilation or falsification of any securities of or belonging to the company or any books affecting or relating to affairs of the company. If a breach is proven, Part 9.4 of the Act provides for criminal penalties only. Therefore, any breaches of Section 1307 will not result in recovery of funds by a liquidator. The Administrators preliminary investigations do not reveal any evidence of falsification of books. False or misleading statements Pursuant to Section 1308 of the Act, a company must not advertise or publish a misleading statement regarding the amount of its capital. It is an offence for a person to make or authorise a statement that, to the person s knowledge is false or misleading in a material particular. The Administrators preliminary investigations do not reveal any evidence of any false or misleading statements. False information Pursuant to Section 1309 of the Act, it is an offence for an officer or employee to make available or give information to a director, auditor, member, debenture holder, or trustee for debenture holders of the company that is to the knowledge of the officer or employee: False or misleading in a particular matter; or Has omitted from it a matter the omission of which renders the information misleading in a material respect. The Administrators preliminary investigations do not reveal any evidence of any false information. 38

42 8 Voidable transactions This section informs creditors about potential voidable transactions that occurred prior to the appointment of the Administrators, and where the property of the Company was disposed of or dealt with, may be recovered by a liquidator. A liquidator has the power to void certain transactions which are either not beneficial, or are detrimental, to a company. An administrator must identify any transactions that appear to be voidable by a liquidator. Enclosed at Annexure F is a creditor information sheet published by ARITA. This information sheet details the types of transactions which a liquidator can seek to void, which include: Unfair preference payments; Uncommercial transactions; Unfair loans; Unreasonable director related transactions; Inappropriate related party transactions Creation of circulating security interests within 6 months of commencement of Administration; and Transactions for the purpose of defeating creditors For the purposes of examining voidable transactions, the Liquidator would review transactions that occurred during the relevant time period (as prescribed under the Act), taking into consideration the relation back day. The relation back day for the Company is 24 May 2017, being the date that the Administrators were appointed. Unfair preferences An unfair preference payment is a transaction, generally occurring in the six months prior to the relation back day, between the company and a creditor, resulting in the creditor receiving from the company, in relation to an unsecured debt owed to the creditor, a greater amount than it would have received in relation to the debt in a winding up of the company. This period is extended up to four years for transactions entered into with a related entity. A transaction can only be considered an unfair preference if the company was insolvent at the time the transaction took place, or the company became insolvent because of the transaction. Unfair preference payments are voidable against a liquidator, and further investigations will be undertaken in the liquidation to determine the likelihood of action for the recovery of unfair preference payments being successful. We note that successful action for unfair preference payments includes establishing the date of insolvency, and the costs of pursuing an unfair preference payment can sometimes outweigh the potential returns. There are various defences under Section 588FA(3) of the Act that may be available to a party that may have received the benefit of a voidable transaction. We have undertaken an initial review of the books and records of the Company and have identified several payments made on or around the date of insolvency. A liquidator, if appointed would need to conduct further investigations in relation to these payments. Uncommercial transactions An uncommercial transaction is a transaction which a reasonable person in the place of the company would not have entered into, taking into account the benefits and the detriment to the company, the respective benefits to the other parties involved and any other related matters. A liquidator must investigate transactions deemed to be uncommercial, in the period two years prior to the date of administration. Based on our preliminary review of the books and records in our possession, we have not identified any transactions which would constitute uncommercial transactions at this stage. 39

43 Unfair loans An unfair loan is a loan agreement where the interest or charges are considered to be extortionate. Unfair loans made to the Company at any time prior to the appointment of the Administrator may potentially be overturned by a subsequently appointed liquidator, whether or not the Company was insolvent at the time the loan was entered into. At this stage we are not aware of any unfair loans entered into by the Company. A liquidator, if appointed, would need to conduct further investigations in relation to any potential unfair loans. Unreasonable director-related transactions Section 588FDA of the Act refers to unreasonable director-related transactions and requires the liquidator to investigate such transactions, having regard to the detriment to the Company (if any) suffered as a consequence of the transaction. The transaction must have been unreasonable, and entered into during the four years prior to the relation back day, regardless of the solvency at the time the transaction occurred. These can include remuneration, bonuses, loans, loan forgiveness and asset transfers to company officers with the four-year period ending on the relation-back date Based on our preliminary review of the books and records in our possession, we have not identified any transactions which would constitute unreasonable director-related transactions at this stage. Arrangements to avoid employee entitlements Part 5.8A of the Act aims to protect the entitlements of a company s employees from agreements that deliberately defeat the recovery of those entitlements upon insolvency. Under Section 596AB(1) of the Act, it is an offence for a person to enter into a transaction or relevant agreement with the intention of, or with intentions that include: Preventing recovery of employee entitlements; or Significantly reducing the amount of employee entitlements recoverable. The Administrators have not identified any contravention of Part 5.8A of the Act. Other potential liquidator recoveries The Administrators have undertaken a preliminary analysis regarding a potential claim which the Company may have under the terms of the franchise agreement with Arcadia. The Administrators have not formed a view as to the likely prospects of such a claim. Directors ability to pay a liquidator s claims At this stage, the Administrators have not made any assessment as to the financial capacity of the Directors to meet any potential actions that we may identify. Reports to the ASIC At this stage, we have not identified any offences that require reporting to the ASIC pursuant to Section 438D of the Act. 40

44 9 Estimated return to creditors This section provides creditors with information on the estimated financial outcome to creditors together with the anticipated timing of any dividend. Estimated return to creditors Liquidation ERV Low $000s Liquidation ERV High $000s Non-circulating assets Plant, equipment and motor vehicles 6 45 Less: realisation costs* - - Funds available to Secured Lender from non-circulating assets 6 45 Circulating assets Cash Debtors Inventory 9,861 9,861 Other receipts Less: PMSI claims (107) - Less: trading costs (3,002) (2,861) Net realisations from circulating assets 6,954 7,394 Less: Administrators fees and disbursements (1,694) (1,694) Less: Liquidators fees and disbursements (210) (186) Less: legal fees, consultant fees and other professional costs (556) (510) Net proceeds from circulating assets 4,495 5,004 Less: priority employee entitlements (2,024) (1,840) Funds available to Secured Lender 2,476 3,207 Add: return of bank guarantees 1,489 1,489 Estimated shortfall to Secured Lender (8,152) (7,420) 41

45 Liquidation ERV Low $000s Liquidation ERV High $000s Funds available to unsecured creditors Other recoveries (voidable transactions if applicable) Unknown Unknown Unsecured claims (22,002) (22,002) Estimated deficiency to unsecured creditors Unknown Unknown * The allocation of estimated realisation costs has not yet been finalised, however will be updated prior to any distribution to the Secured Lender. The above calculations are an estimate only and may change due to: The finalisation of all trading accounts relating to the administration period; The quantum of landlord claims following the reconciliation of amounts set off against bank guarantees; and Any recoveries from potential actions against the Directors and/or other parties. Estimated return to unsecured creditors The funds received for the sale of inventory will be applied in the first instance to payment of priority employee claims. Any balance will be applied to the debt due to the Secured Lender. As the proceeds are likely to be insufficient to discharge the Secured Lender s debt in full, there is unlikely to be funds available to unsecured creditors. Liquidation ERV Low % Liquidation ERV High % Priority employee creditors 100% 100% Secured creditor (inc. return of bank guarantees and letter of credit) 33% 39% Unsecured creditors 0% 0% 42

46 10 Administrators opinion Given that the Company is insolvent and that no DOCA has been proposed, the Administrators recommend that creditors vote in favour of the Company being placed into liquidation. Pursuant to Section 439A(4)(b) of the Act, we are required to provide creditors with a statement setting out our opinion on whether it is in creditors interests for the: Administration to end (and control revert back to the Company s directors); Company to be wound up; and Company to execute a DOCA. Each of these options is considered below. In forming our opinion, it is necessary to consider an estimate of the dividend creditors might expect and the likely costs under each option. Administration to end The Company is insolvent and unable to pay its debts as and when they fall due. Accordingly, returning control of the Company to its Directors would be inappropriate and is not recommended. DOCA As no DOCA has been proposed at this point in time, this option is not available to creditors. Winding up of the Company In the absence of a DOCA proposal, it is our opinion that the Company should be placed into liquidation. A liquidator would be able to conduct detailed investigations into the conduct of directors and the financial affairs of the Company. A liquidator will also be empowered to: Complete the sale of residual assets in an orderly manner. Pursue various potential recoveries under the Act. Distribute recoveries made in accordance with the priority provisions of the Act. Report to the ASIC on the results of investigations into the Company s affairs. 43

47 11 Recent changes to the Act Resolutions relating to the COC On 1 September 2017, a number of changes came into effect as part of the Insolvency Law Reform Act 2016 (ILRA). Several of these changes impact committees of creditors formed for administrations and will therefore be relevant for the existing COC. On 1 September 2017, the COC became a committee of inspection (COI) in accordance with Section 1608(1) of the Act. The COI is governed by the Insolvency Practice Schedule (Corporations) (IPS). In accordance with IPS 80-55, members of the COI of a company must not directly or indirectly derive any profit or advantage from the external administration of the company, unless creditors resolve otherwise. The transitional provisions stipulate that IPS applies to transactions entered into from 1 September 2017 but does not apply to transactions prior to 1 September Disbursements In accordance with IPS 60-20, administrators (or a related entity, which could include an employee of the Administrators) are prohibited from deriving a profit or advantage from the administration of a company. Accordingly, all internal disbursements (disbursements not provided by an external third party, for example printing and photocopying) will be charged at cost, except in circumstances where the payment of internal disbursements has been approved by creditors. IPS applies to external administrations which commenced prior to 1 September 2017 but where the disbursements are paid post 1 September 2017, unless there is an existing arrangement in place before 1 September 2017 (Section 1582 of the Act). 44

48 12 Further information and enquiries The ASIC has released several insolvency information sheets to assist creditors, employees and shareholders with their understanding of the insolvency process. You can access the relevant ASIC information sheets at We will advise creditors in writing of any additional matter that comes to our attention after the release of this Report, which in our view is material to creditors consideration. Should you have any enquiries, please contact Candice Ferreira on (02) or by at Dated this 6 th day of October 2017 Ryan Eagle James Stewart Jim Sarantinos Administrator Administrator Administrator 45

49 Annexures 46

50 A Receipts & Payments from 24 May 2017 to 30 September 2017 Receipts Sales 17,104 Sale of stock on hand 5,775 Opening cash on hand 98 Debtor collections 88 Other receipts 73 Total receipts 23,138 Payments Net trading proceeds to Arcadia (post 8 June 2017) (4,094) Wages, salaries and on costs (3,789) Rent and outgoings (2,761) GST paid and PAYG withheld (2,139) Distribution to Secured Lender (1,741) Administrators remuneration and disbursements (1,504) Store costs (553) Customs duty (426) Legal fees and disbursements (339) Myer licence fee (254) Shared services costs (182) Transport/Logistics (165) Consultancy costs (140) Bank charges and merchant fees (126) Insurance (82) IT expenses (64) Utilities (59) Customer refunds (33) Other (8) Total payments (18,460) Total $ Cash at bank at 30 September ,678 47

51 B Notice of meeting of creditors Form 529 Notice of meeting of creditors Corporations Act 2001 Subregulation (2) Austradia Pty Limited (Administrators Appointed) (the Company) ACN NOTICE is given that a meeting of creditors of the Company will be held on Wednesday, 18 October 2017 at 10:30 am at the Grace Hotel, 77 York Street, Sydney NSW Agenda 1. To consider a statement by the Directors about the Company s business, property, affairs and financial circumstances. 2. To consider the circumstances leading to the appointment of the Administrators to the Company, and the various options available to creditors. 3. To consider the report of the Administrators. 4. To fix the remuneration of the Administrators. 5. To resolve that: a) The Company execute a Deed of Company Arrangement; or b) The Company be wound up; or c) The Administration should end (and control revert back to the Company s directors). 6. If it is resolved that the Company be wound up, and an alternate Liquidator is proposed, consider whether creditors wish to appoint the alternate Liquidator. 7. If it is resolved that the Company be wound up, consider whether a Committee of Inspection is to be appointed, and if so, the members of that Committee. 8. If it is resolved that the Company be wound up, to fix the remuneration of the Liquidators. 9. If it is resolved that the Company be wound up, consider whether, pursuant to Section 477(2A) of the Corporations Act 2001 (the Act), creditors authorise the Liquidators to compromise a debt owed to the Company of any amount. 10. If it is resolved that the Company be wound up, that pursuant to Section 477(2B) of the Act, creditors authorise the Liquidators to enter into any agreement on the Company s behalf where: a. The term of the agreement may end; or b. Obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance, more than three months after the agreement is entered into. 11. If it is resolved that the Company be wound up, consider whether, subject to obtaining the approval of the Australian Securities & Investments Commission (ASIC) pursuant to Section 542(4) of the Act, the books and records of the Company and of the Liquidators may be disposed of by the Liquidators 12 months after the dissolution of the Company or earlier at the discretion of ASIC. 12. Any other business that may be lawfully brought forward. For a person to be eligible to attend and vote at the meeting on your behalf, a Form 532, Appointment of Proxy, is to be completed and submitted by no later than 4:00 pm on Tuesday, 17 October 2017, to: Austradia Pty Limited (Administrators Appointed) c/- Ferrier Hodgson GPO Box 4114, SYDNEY NSW 2001 Tel: Fax: tscreditors@fh.com.au 48

52 Note: In accordance with Regulation A of the Corporations Regulations 2001, if a proxy is submitted by facsimile, the original document must be lodged within 72 hours after lodging the faxed copy. A company may only be represented by proxy or by an attorney appointed pursuant to Corporations Regulations and respectively or by a representative appointed under Section 250D of the Act. In accordance with Subregulation (1) of the Corporations Regulations, creditors will not be entitled to vote at the meeting unless they have previously lodged particulars of their claim against the Company in accordance with the Corporations Regulations and that claim has been admitted, for voting purposes, wholly or in part. Dated this 5 th day of October 2017 Ryan Eagle Administrator 49

53 C Appointment of proxy Form Appointment of Proxy Corporations Act 2001, Regulation Return to no later than 4:00 pm on 17 October 2017 to: Ferrier Hodgson GPO Box 4114, SYDNEY NSW 2001 Tel: Fax: tscreditors@fh.com.au Indebted Company: Austradia Pty Limited (Administrators Appointed) ACN Date of Appointment: 24 May 2017 A. Name and Contact Details of Person or Entity Entitled to Attend Meeting 1 (if entitled in a personal capacity, given name and surname; if a corporate entity, full name of company, etc) 2 of (address) 3 Tel: 4 B. Appointment of Person to Act as Proxy Note: You may nominate the Chairperson of the meeting as your proxy (or your alternate proxy in the event that the first-named proxy is not in attendance). 1 I/We, as named in Section A above, a creditor/employee/contributory/member of the Company, appoint 2 (name of person appointed as proxy) 3 4 or in his / her absence (address of person appointed as proxy) 5 (name of person appointed as alternate proxy) 6 7 as *my / *our proxy (address of person appointed as alternate proxy) to vote at the meeting of creditors to be held on 18 October 2017 at 4:00 pm at the Grace Hotel, 77 York Street, Sydney NSW 2000, or at any adjournment of that meeting in accordance with the instructions in Section C below. C. Voting Instructions 1 *My / *Our proxy, as named in Section B above, is entitled to act as *my / *our : 2 general proxy, to vote on *my / *our behalf and / or 3 special proxy, to vote on *my / *our behalf specifically as follows: Resolution For Against Abstain 1. That the remuneration of the Administrators, as set out in the Remuneration Approval Request Report dated 6 October 2017 for the period from 1 September 2017 to 30 September 2017 be fixed in the amount of $226,923.50, plus any applicable GST, and may be paid. 2. That the remuneration of the Administrators, as set out in the Remuneration Approval Request Report dated 6 October 2017, for the period from 1 October 2017 to 17 October 2017 be fixed up to a maximum amount of $99,830.00, plus any applicable GST, but subject to upward revision by resolution of creditors, and that the Administrators be authorised to make periodic payments on account of such accruing remuneration as incurred. 3. That, pursuant to Section 439C of the Corporations Act 2001 (the Act), the Company execute a Deed of Company Arrangement, under 50

54 Resolution For Against Abstain Part 5.3A of the Act, in the same form as the proposal statement (if any) presented to the meeting. 4. That the Company be wound up. 5. That in the event that the Company is wound up and an alternate Liquidator is proposed, that the existing Liquidators be replaced and (Alternative Appointee) be appointed in their stead. 6. If the Company is wound up that a Committee of Inspection be appointed, the members of which are to be determined by the meeting. 7. If the Company is wound up that the remuneration of the Liquidators, as set out in the Remuneration Approval Request Report dated 6 October 2017 for the period from 18 October 2017 to completion be fixed up to a maximum amount of $180,810.00, plus any applicable GST, but subject to upward revision by resolution of creditors, or the Committee of Inspection should one be appointed, and that the Liquidators be authorised to make periodic payments on account of such accruing remuneration as incurred. 8. If the Company is wound up that, pursuant to Section 477(2A) of the Corporations Act 2001, creditors authorise the Liquidators to compromise a debt owed to the Company up to any amount. 9. If the Company is wound up that, pursuant to Section 477(2B) of the Corporations Act 2001, creditors authorise the Liquidators to enter into any agreement on the Company s behalf where: a) the term of the agreement may end; or b) obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance; more than three months after the agreement is entered into. 10. If the Company is wound up that, subject to obtaining the approval of the Australian Securities & Investments Commission (ASIC) pursuant to Section 542(4), the books and records of the Company and of the Liquidators be disposed of by the Liquidators 12 months after the dissolution of the Company or earlier at the discretion of ASIC. 11. That the Administration should end. D. Signature 1 Dated: 2 Signature: 3 Name / Capacity: 51

55 Creditor Assistance Sheet: Completing a Proxy Form Section A Name and Contact Details of Person or Entity Entitled to Attend Meeting 1. Insert the full name of the employee, individual, sole trader, partnership or company that the debt is owed to. 2. Insert the address of the employee, individual, sole trader, partnership or company that the debt is owed to. 3. Insert the telephone number of the employee, individual, sole trader, partnership or company that the debt is owed to. 4. Insert the address of the employee, individual, sole trader, partnership or company that the debt is owed to. Section B Appointment of Person to Act as Proxy 1. Cross out any wording that is not applicable. For example, if the employee/individual/sole trader/partnership/company is a creditor, cross out *eligible employee creditor, *contributory, *debenture holder and *member. 2. Insert the name of the person who will be exercising the creditor s vote at the meeting. If someone is attending the meeting in person, that person s name should be inserted. Alternatively, if someone is unable to attend, but you still want to cast a vote at the meeting, then you can appoint the Chairperson of the meeting to vote on your behalf by inserting the words the Chairperson here. 3. Insert the address of the person nominated at (2) that will be attending the meeting as proxy. If you have elected the Chairperson because no one is attending in person, leave this row blank. 4. Cross out any wording that is not applicable. 5. If the person you have elected to attend is unavailable on the day, you may nominate a second person to attend in their absence. Alternatively, you can appoint the Chairperson of the meeting to vote on your behalf by inserting the Chairperson. 6. Insert the address of the second person here. If you have elected the Chairperson, leave this row blank. 7. Cross out any wording that is not applicable. Section C Voting Instructions 1. Cross out any wording that is not applicable. 2. Insert an X in this box if you want the person who is attending the meeting to vote as they see fit on each of the resolutions in the Resolution table. If you select this option, proceed to Section D, unless you wish to vote specifically on certain resolutions, in which case you also insert an X in the special proxy box and select For, Against or Abstain on the resolutions. The person voting at the meeting will have discretion to vote as they see fit on any resolutions where you have not selected For, Against or Abstain. 3. Insert an X in this box if you want the person who is attending the meeting, to vote exactly in accordance with your instructions. If you select this option, you must select For, Against or Abstain for each of the resolutions in the Resolution table. Do not tick more than one box for each resolution. Section D Signature Instructions 1. Insert the date that the proxy form is being signed. 2. The form should be signed by one of the following persons: If the debt is owed to an employee/individual, then the individual that the debt is owed to; or If the debt is owed to a sole trader, then the sole trader that the debt is owed to; or If the debt is owed to a partnership, then one of the partners of the partnership; or If the debt is owed to a company, then a duly authorised office of the company (normally a director or secretary of the company). 3. Insert the name of the person signing the form, and note their capacity (that is, their role): If the debt is owed to a sole trader, note their capacity as proprietor, eg: [Full name], proprietor ; or If the debt is owed to a partnership, note their capacity as partner, eg: [Full name], partner of the firm named in Section A above ; or If the debt is owed to a company, note their capacity as director or secretary, eg: [Full name], director/secretary of the company named in Section A above ] 52

56 D Proof of debt Form 535 Formal Proof of Debt or Claim Form Corporations Act 2001, Regulation (2) Return to: Ferrier Hodgson GPO Box 4114, SYDNEY NSW 2001 Tel: Fax: Indebted Company: Austradia Pty Limited (Administrators Appointed) ACN Date of Appointment: 24/05/2017 A. Name and Contact Details of Creditor 1 (the Creditor) (if in a personal capacity, given name and surname; if a corporate entity, full name of company, etc) 2 of (insert address) 3 Tel: 4 Tick this box to elect to receive electronic notification of notices or documents, in accordance with Section 600G of the Corporations Act 2001, at the address specified above. B. Details of Debt or Claim 1 Amount owing: (insert dollars and cents, inclusive of GST if applicable) 2 Nature of Debt or Claim: (insert description of debt and/or reference any supporting documentation) 3 Select one of the following options: The Creditor is an unsecured creditor of the indebted Company The Creditor is a secured creditor of the indebted Company The Creditor is an employee / former employee of the indebted Company For all claims: 4 I have attached supporting documentation to substantiate the Creditor s claim (secured creditors must attach evidence of security) 5 To my knowledge or belief the creditor has not, nor has any person by the creditor's order had or received any satisfaction or security for the sum or any part of it except for the following: (insert details and value of security where relevant) C. Signature 1 Dated: 2 Signature: 3 Name / Capacity 53

57 Creditor Assistance Sheet: Completing a Proof of Debt Form Section A Name and Contact Details of Creditor 1. Insert the full name of the employee, individual, sole trader, partnership or company that the debt is owed to. 2. Insert the address of the employee, individual, sole trader, partnership or company that the debt is owed to. 3. Insert the telephone number of the employee, individual, sole trader, partnership or company that the debt is owed to. 4. Insert the address of the employee, individual, sole trader, partnership or company that the debt is owed to. Section B Details of Debt or Claim 1. The amount owing should only include debts or claims which arose prior to the date of appointment. 2. Insert the currency if not Australian dollars. 3. Type of creditor: tick one of the options only. 4. For all claims, ensure supporting documentation is attached, such as invoices, statements, agreements. 5. For secured creditors, insert particulars of all securities held. If the securities are on the property of the company, assess the value of those securities. If any bills or other negotiable securities are held, indicate refer attached above and show them in a schedule in the following form: Date Drawer Acceptor Amount ($) Due Date Section C Signature Instructions 1. Insert the date that the proof of debt form is being signed. 2. The form should be signed by one of the following persons: If the debt is owed to an employee/individual, then the individual that the debt is owed to; or If the debt is owed to a sole trader, then the sole trader that the debt is owed to; or If the debt is owed to a partnership, then one of the partners of the partnership; or If the debt is owed to a company, then a duly authorised office of the company (normally a director or secretary of the company). 3. Insert the name of the person signing the form, and note their capacity (that is, their role): If the debt is owed to a sole trader, note their capacity as proprietor, eg: [Full name], proprietor ; or If the debt is owed to a partnership, note their capacity as partner, eg: [Full name], partner of the firm named in Section A above ; or If the debt is owed to a company, note their capacity as director or secretary, eg: [Full name], director/secretary of the company named in Section A above ] 54

58 E Remuneration Approval Request Report Corporations Act 2001, Section 449E Austradia Pty Limited (Administrators Appointed) (the Company) ACN Declaration We, Ryan Eagle, James Stewart and Jim Sarantinos of Ferrier Hodgson, have undertaken a proper assessment of this remuneration claim for our appointment as Administrators of the Company in accordance with the Corporations Act 2001 (Cth) (the Act), the Australian Restructuring Insolvency & Turnaround Association (ARITA) Code of Professional Practice (the Code) and applicable professional standards. We are satisfied that the remuneration claimed is in respect of necessary work, properly performed, or to be properly performed, in the conduct of the administration. 1 Executive summary Summary of remuneration approval sought for the Company To date, remuneration totalling $1,351, has been approved and paid in the administration of the Company. This remuneration report details approval sought for the following fees: Period Amount (ex GST) $ Past remuneration approved: Voluntary administration 24 May 2017 to 31 August ,351, Total past remuneration approved 1,351, Current remuneration approval sought: Voluntary administration Resolution 1: 1 September 2017 to 30 September , Resolution 2: 1 October 2017 to 17 October , Total approval sought voluntary administration* 326, Liquidation (if applicable) Resolution 7: 18 October 2017 to completion 180, Total approval sought liquidation (if applicable)* 180, * Approval for the future remuneration sought is based on an estimate of the work necessary to the completion of the administration and any subsequent liquidation. Should additional work be necessary beyond what is contemplated, further approval may be sought from creditors. Please refer to Parts 2 and 3 for full details of the calculation and composition of the remuneration approval sought. 55

59 2 Description of work completed / to be completed Resolution 1 Company: Austradia Pty Limited (Administrators Appointed) Administration Type: Voluntary Administration Practitioner: Ryan Eagle, James Stewart and Jim Sarantinos of Ferrier Hodgson Period: 1 September 2017 to 30 September 2017 Task area General description Includes Assets hours $41, (excl GST) Plant and equipment Debtors Liaising with plant and equipment specialists regarding property, plant and equipment assets Reviewing and assessing debtor ledger Correspondence with debtors Assessment of potential ATO and OSR recoveries Negotiations with Myer in relation to amounts owed under Services and Support Agreement Stock Liaising with Armaguard in relation to final cash collections for licence period Dealing with store issues in relation to staffing, maintenance and other daily operational issues prior to handover to Arcadia on 3 September 2017 Corresponding with Arcadia to seek approval for store related operating costs incurred and making recommendations in relation to same Accounting to Arcadia for proceeds from ongoing operations under the licence agreement Consolidating daily cash receipts reports and reviewing tender types Authorising purchase orders Responding to customer queries regarding refunds including processing of refunds Liaising with inward freight provider in relation to duties and delivery of new stock Facilitation of transfer of employees and assignment of leases to purchaser Complying with requirements for completion of sale Assisting with transition of key business and operating systems to purchaser Preparation of estimated outcome statement 56

60 Task area General description Includes Creditors hours $84, (excl GST) Leasing Creditor enquiries Liaising with landlords with respect to each of the stores Liaising with landlords in relation to assignment of lease for Ultimo premises Liaising with Arcadia regarding the assignment of leases Attending to bank guarantee claims Review and preparation of correspondence to creditors and their representatives via facsimile, and post Receive and follow up creditor enquiries via telephone and Correspondence with Committee of Inspection members Retention of title claims Adjudication of remaining retention of title claim Notifying claimant of outcome of adjudication Secured Lender reporting Preparing updates to Secured Lender Responding to Secured Lender s queries Creditor reports Preparing section 439A report to creditors Dealing with proofs of debt Receipting and filing proofs of debt Meeting of creditors Preparation of updates to Committee of Inspection Convening and holding meetings of the Committee of Inspection Preparation of meeting notices, proxies and advertisements in relation to meeting of Committee of Inspection Preparation of minutes of Committee of Inspection meeting Employees hours $69, (excl GST) Employee enquiries Responding to employee enquiries via and telephone Liaising with in-house HR and payroll teams in relation to employee issues 57

61 Task area General description Includes Calculation of entitlements Reviewing contracts, awards and other relevant legislation and policies Reviewing employee files and Company s books and records Calculation of employee entitlements Reconciling superannuation accounts Preparation of letters to employees advising of their estimated entitlement claims Investigation 28.3 hours $12, (excl GST) Other employee issues Conducting investigation Discussions with go forward store staff in relation to continuing employment Liaising with superannuation funds regarding contributions and termination of employees Liaising with OSR regarding payroll tax issues Correspondence with visa holder employees in relation to redundancy Collection and review of Company books and records, including board papers Review and preparation of Company nature and history Preparation of comparative financial statements Review of specific transactions and liaising with Directors and Management in relation to same Initial investigation of other potential claims available to a liquidator Investigation as to reasons for the failure of the Company and date of insolvency Administration 47.6 hours $19, (excl GST) Litigation / recoveries Correspondence Document maintenance / file review / checklist Liaising with solicitors regarding potential recovery actions General correspondence with employees, creditors and suppliers via telephone, and post in relation to the conduct of the Administration Internal correspondence in relation to workflow planning and tasks required Correspondence with key management personnel Filing of documents File reviews 58

62 Task area General description Includes Updating checklists Insurance Correspondence with insurer regarding ongoing insurance requirements Bank account administration Merchant services maintenance and termination Requesting bank statements Bank account reconciliations ASIC forms Preparing and lodging ASIC forms Correspondence with ASIC regarding statutory forms ATO and other statutory reporting Preparing monthly BAS lodgements Planning / review Discussions regarding status / strategy of administration Books and records / storage Sending the Company s pre-appointment records to storage 59

63 Resolution 2 Company: Austradia Pty Limited (Administrators Appointed) Administration Type: Voluntary Administration Practitioner: Ryan Eagle, James Stewart and Jim Sarantinos of Ferrier Hodgson Period: 1 October 2017 to 17 October 2017 Task area General description Includes Assets 40 hours $18, (excl GST) Creditors 70 hours $32, (excl GST) Plant and equipment Debtors Stock Leasing Liaising with plant and equipment specialists regarding property, plant and equipment assets Correspondence with debtors Reviewing and assessing debtor ledgers Correspondence with Myer regarding amounts outstanding under Services and Support Agreement Accounting to Arcadia for proceeds from ongoing operations under the licence agreement Preparing cash flow / budgets Review of trading position Preparing and authorising receipt vouchers Preparing and authorising payment vouchers Finalising any residual liabilities Liaising with owners of leased premises in relation to assignment of lease for Ultimo premises Dealing with bank guarantee claims and collection of rental bond for Ultimo premises Other assets Tasks associated with realising other assets Receive and follow up creditor enquiries via Creditor enquiries Retention of title claims telephone and Maintaining creditor enquiry register Review and prepare correspondence to creditors and their representatives via and post Liaise with creditor in relation to retention of title claim Seek legal advice where necessary Secured Lender reporting Creditor reports Dealing with proofs of debs Prepare updates to Secured Lender Responding to Secured Lender s queries Prepare and send section 439A report to creditors Investigations with regard to certain transactions entered into prior to the appointment of the Administrators Receipt and file proof of debt forms in relation to Second Meeting 60

64 Task area General description Includes Employees 57 hours $26, (excl GST) Investigation 25 hours $11, (excl GST) Meeting of creditors Employee enquiries Calculation of entitlements Employee entitlements payout Other employee issues Conducting investigation Forward notice of meeting to all known creditors Preparation of meeting file including agenda, certificate of postage, attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting Preparation and lodgment of minutes of Committee of Inspection meeting with ASIC Respond to stakeholder queries and questions prior to Second Meeting Receive and follow up employee enquires via telephone Review and prepare correspondence to employees Finalising employee entitlements including dealing with all disputes received from employees Prepare payment of entitlements to employees Processing entitlement payment run including all related on costs Liaise with payroll team in relation to processing employee entitlements Issuing payment advices to employees Correspondence with former employees in relation to 457 visa issues. Reviewing Company s books and records Finalising summary of Company s nature and history Review of comparative financial statements Review of specific transactions and liaising with directors and senior management team regarding certain transactions Investigation of any other potential claims available Administration 25 hours $11, (excl GST) Litigation / recoveries Correspondence Document maintenance / file review / checklist Insurance Liaising with solicitors regarding potential recovery action General correspondence with employees, creditors and suppliers via telephone, and post in relation to the conduct of the Administration Finalise administration period file review Updating checklists Correspondence with insurer regarding ongoing insurance requirements 61

65 Task area General description Includes Bank account administration ASIC forms ATO and other statutory reporting Finalisation Review of broker fee and ongoing policies Liaise with insurer in relation to assignment of leases Preparing correspondence to CBA in relation to sweeping funds from pre-appointment bank account Requesting bank statements Bank account reconciliations Lodgment of 439A report with ASIC and preparation of notices in relation to second meeting Preparing BASs Review PAYG summaries prepared by payroll function following payment of employee entitlements Attendance to relevant Administration finalisation tasks Planning / review Internal team strategy meetings 62

66 Resolution 7 Company: Administration Type: Practitioner: Period: Austradia Pty Limited (Administrators Appointed) Liquidation Ryan Eagle, James Stewart and Jim Sarantinos of Ferrier Hodgson 18 October 2017 to completion of the Liquidation Task area General description Includes Assets 130 hours $62, (excl GST) Creditors 16 hours $7, (excl GST) Plant and equipment Debtors Stock Leasing Other assets Creditor enquiries Retention of title claims Secured creditor reporting Tasks associated with realising residual plant and equipment and other remaining assets Correspondence with outstanding debtors Finalising pre-appointment debtor position Calculate weekly net amount figures payable to Arcadia Perform reconciliation of trading expenses for licence period Finalising any residual trade on liabilities and issues Preparing and authorising receipt vouchers Preparing and authorising payment vouchers Preparing cash flow / budgets Review of trading position Dealing with transfer of Ultimo lease, bank guarantee claims and return of rental bond for Ultimo facility Tasks associated with realising other assets Receive and follow up creditor enquiries via telephone and Review and prepare correspondence to creditors and their representatives via and post Liaise with creditor in relation to retention of title claim Seek legal advice where necessary Prepare updates to secured creditor Responding to secured creditor s queries Creditor reports Preparing reports to creditors as required Dealing with proofs of debs Receipting and filing proofs of debt Meeting of creditors Holding Second Meeting of creditors Preparation and lodgment of minutes of meeting with ASIC 63

67 Task area General description Includes Employees 55 hours $26, (excl GST) Investigation 87 hours $41, (excl GST) Administration 87 hours $41, (excl GST) Prepare for an attend meetings of creditors as required Respond to stakeholder queries and questions immediately following meeting Employee enquiries Receive and follow up employee enquires via telephone Calculation of entitlements Other employee issues Conducting investigation Litigation / recoveries Bank account administration Correspondence Document maintenance / file review / checklist Finalising employee entitlements including dealing with all disputes received from employees Dealing with issues in relation to bounce back of superannuation payments Reviewing Company s books and records Review of specific transactions and liaising with directors and senior management team regarding certain transactions Investigation of any other potential claims available Preparation of investigation file Preparation of deficiency statement Lodgement of investigation report with ASIC Preparation and lodgement of supplementary report if required Internal meetings to discuss status of litigation Liaising with solicitors regarding potential recovery actions Preparing correspondence closing accounts Requesting bank statements Bank account reconciliations Correspondence with bank regarding specific transfers General correspondence with employees, creditors and suppliers via telephone, and post in relation to the conduct of the liquidation File reviews Updating checklists Planning / review Internal team strategy meetings Insurance Correspondence with insurer regarding ongoing insurance requirements Review of broker fee and ongoing policies 64

68 Task area General description Includes Liaise with insurer in relation to assignment of leases Preparing and lodging ASIC forms ASIC Form 524 and other forms including 505, 524, 911 etc Correspondence with ASIC regarding statutory forms Preparing BASs ATO and other statutory reporting Review PAYG summaries prepared by payroll function following payment of employee entitlements Dealing with records in storage Reviewing company files and storing Books and records / storage required documents Preparing box listings for documents to go to storage Attendance to relevant finalisation tasks Notifying ATO of finalisation Finalisation Cancelling ABN / GST / PAYG registration Completing checklists 65

69 3 Calculation of remuneration Resolution 1 Employee Position Rate Total (ex GST) Assets Creditors Employees Investigation Administration $ Hrs $ Hrs $ $ Hrs $ Hrs $ Hrs $ Stewart, James Partner / Appointee , Eagle, Ryan Partner / Appointee , , Sarantinos, Jim Partner / Appointee Dampney, James Partner , , , , , Baily, Clare Director , , Sutherland, Ian Senior Manager , , , , , Livanos, Martie Manager , , Tsaptsalis, Nicholas Assistant Manager , , Arnfield, Sarah Assistant Manager , , , , , Tuck, Madeleine Senior Analyst , , Ferreira, Candice Analyst , , , , , LeRoux, Astrid Accountant , , Total (excluding GST) , , , , , , GST 22, , , , , , Total (including GST) 249, , , , , , Average Hourly Rate

70 Resolution 2 The remuneration estimate may be summarised as follows: Task Hours Amount $ Assets Creditors , Employees , Investigation , Administration , Total , Task Resolution 7 Hours Amount $ Assets , Creditors , Employees , Investigation , Administration , Total , Please note that the above summaries are estimates only. If costs exceed the estimate, creditors will be advised accordingly and further approval will be sought. 4 Statement of remuneration claim Resolutions to be put to creditors at the meeting convened for 18 October 2017 At the meeting of creditors convened for 18 October 2017, creditors will be asked to consider the following resolutions: Resolution 1: "That the remuneration of the Administrators, as set out in the Remuneration Approval Request Report dated 6 October 2017, for the period from 1 September 2017 to 30 September 2017 be fixed in the amount of $226,923.50, plus any applicable GST, and may be paid." Resolution 2: "That the remuneration of the Administrators, as set out in the Remuneration Approval Request Report dated 6 October 2017, for the period from 1 October 2017 to 17 October 2017 to be fixed up to a maximum amount of $99,830.00, plus any applicable GST, but subject to upward revision by resolution of creditors, and that the Administrators be authorised to make periodic payments on account of such accruing remuneration as incurred." Resolution 7: "That the remuneration of the Liquidators, as set out in the Remuneration Approval Request Report dated 6 October 2017, for the period from 18 October 217 to completion of the liquidation to be fixed up to a maximum amount of $180,810.00, plus any applicable GST, but subject to upward revision by resolution of creditors, and that the Liquidators be authorised to make periodic payments on account of such accruing remuneration as incurred." 67

71 Please note that the above is an estimate only. Final costs depend heavily upon: The finalisation of all outstanding trading issues and accounts; and The level of work required to investigate and subsequently pursue any potential recoveries from actions available to the liquidators. If costs exceed the estimate, creditors will be advised accordingly and further approval of the Administrators remuneration will be sought in the future. Remuneration approved and drawn to date The Administrators remuneration approved and drawn to date is as follows: Amount approved Amount drawn Period $ $ 24 May 2017 to 31 August ,351, ,351, *Note: excludes disbursements and GST 5 Remuneration recoverable from external sources The Administrators entered into an agreement with Top Shop / Top Man Limited (Arcadia) on 5 September 217 whereby Arcadia agreed to reimburse the Administrators $10, (plus GST) in respect of professional and legal costs incurred in connection with the ongoing provision of merchant terminals and cash collection services for the period 1 September 2017 to 15 September Disbursements Types of disbursements Disbursements are divided into three types: Externally provided professional services. These are recovered at cost. An example is legal fees. Externally provided non-professional costs such as travel, accommodation and search fees. These disbursements are recovered at cost. Internal disbursements such as photocopying, printing and postage. These disbursements, if charged to the administration, would generally be charged at cost; although if a data room is utilised, the fee will comprise an initial setup fee and then a fee based on the duration and size of the data room. Certain services provided by Ferrier Hodgson may require the processing of electronically stored information into specialist review platforms. Where these specialist resources are utilised, the fee will be based on units (e.g. number of computers), size (e.g. per gigabyte) and/or period of time (e.g. period of hosting). The relevant rates for internal disbursements are set out below: Disbursement type Advertising Couriers Data room hosting ediscovery services Mileage reimbursement Photocopying Photocopying (outsourced) Printing Printing (outsourced) Postage Searches Storage and storage transit Charges (excl GST) At cost At cost Variable Variable $0.66 per kilometre At cost At cost At cost At cost At cost At cost At cost 68

72 Disbursement type Charges (excl GST) Telephone calls Note: Above rates are applicable for the financial year ending 30 June 2018 Disbursements paid from the administration to Ferrier Hodgson At cost Disbursements totalling $15, (excluding GST) were paid from the administration to Ferrier Hodgson for the period 24 May 2017 to 31 August These disbursements were outlined in our Remuneration Approval Request Report dated 19 September There have been no disbursements paid from the administration to Ferrier Hodgson for the period from 1 September 2017 to 6 October Future disbursements provided by Ferrier Hodgson will be charged to the administration on the same basis as the table in Part Report on progress of the administration The Remuneration Approval Request Report must be read in conjunction with the Report dated 6 October 2017 which outlines the progress of the administration. 8 Summary of receipts and payments A summary of receipts and payments in the administration to date appears in Annexure A to the Report. 9 Queries If you require further information in respect of the above, or have other questions, please contact Candice Ferreira of this office on Information available The partners of Ferrier Hodgson are members of ARITA. Ferrier Hodgson follows the Code. A copy of the Code may be found on the ARITA website at An information sheet concerning approval of remuneration in external administrations can also be obtained from the Australian Securities & Investments Commission website at Dated this 5 th day of October 2017 Ryan Eagle Administrator 69

73 F ARITA creditor information sheet 70