Austradia Pty Limited (In Liquidation) ACN

Transcription

1 Austradia Pty Limited (In Liquidation) ACN Statutory Report by Liquidator 17 January 2018 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

2 Contents 1 Introduction 2 2 Current position 2 3 Investigation into the Company s affairs 4 4 Return to creditors 6 5 Liquidators remuneration 7 6 Conclusion 7 Glossary 8 Annexure 9 A Receipts & Payments 10 1

3 1 Introduction I refer to the appointment of James Stewart, Jim Sarantinos and myself as Voluntary Administrators of the Company on 24 May 2017 and to our subsequent appointment as Liquidators of the Company on 18 October This report should be read in conjunction with the information contained in our previous correspondence, and in particular to our 439A Report. These documents are available to creditors via the Ferrier Hodgson website at If creditors wish to receive a hard copy of previous correspondence, please provide your current mailing address or address (for electronic notification) to this office. We now take this opportunity to report to you on the following matters: An update on the progress of the liquidation; The current position in relation to the realisation of assets; The results of our investigations into the Company's affairs; and The estimated return to creditors. As per the 439A Report, funds received from the sale of the Company s inventory were applied in payment of priority employee claims. The balance of funds available will be applied to the debt due to the Secured Lender and there will be no funds available to unsecured creditors. 2 Current position Matters addressed during the liquidation Since our appointment as Liquidators, the following matters have been attended to: Ongoing communications with the Directors and key management personnel of the Company; Ongoing communications with creditors of the Company; Ongoing review of the books and records of the Company; Tasks associated with the realisation of the remaining assets of the Company, including plant & equipment and debtors; Finalisation and closure of the Administrator s trading accounts; Investigations into the potential recovery of antecedent transactions; Attendance to statutory requirements; and Investigation into the affairs of the Company and lodgement of a statutory report with ASIC. Liquidators realisations to date Summary of receipts and payments A summary of the receipts and payments is attached as Annexure A. Creditors are advised that the Liquidators account of receipts and payments can be inspected at the offices of Ferrier Hodgson, Level 25, One International Towers Sydney, 100 Barangaroo Avenue, SYDNEY NSW 2000, by appointment. 2

4 Asset realisations A summary of asset realisations is set out below: Directors Statement ERV Liquidators ERV $000s $000s Cash at bank Debtors Inventory 29,000* 9,861 Other assets 50 - Plant and equipment Total assets 29,872 10,261 *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 Cash at bank At the date of our appointment as Voluntary Administrators, the Company had a total cash balance of c. $98,000 which has been realised in full Debtors To date, we have realised c. $264,000 and we do not expect there to be any further debtor recoveries. The Company s largest debtor related to an amount due from Myer for net concession proceeds for the period 14 to 24 May Following our appointment, Myer claimed a significant offset relating to amounts due under the services and support agreement. We have now reached an agreement with Myer resulting in a final recovery of c. $35, Inventory As per the 439A Report, total inventory realisations during the voluntary administration period were c. $9.9 million. There will be no further realisations from this source Other assets The Directors Statement disclosed an amount of c. $50,000 relating to a cash deposit account. This balance was subsequently offset by the Secured Lender following our appointment Plant & equipment The Company owned plant and equipment including office furniture, warehouse equipment, racking, store fixtures and fittings, IT equipment and a motor vehicle. Realisations to date total approximately $38,000 and no significant further recoveries are expected. 3

5 3 Investigation into the Company s affairs Creditors should refer to our 439A Report for details in relation to the Administrators preliminary investigations. The following section provides an update on our detailed investigations into the affairs of the Company. Deficiency Statement An assessment as to the ERV of the Company s assets and liabilities is summarised below. Ref Directors Statement ERV $000s Liquidators ERV $000s Assets ,872 10,261 Liabilities Secured Lender ,750 8,434 Employee claims ,872 Unsecured creditors 15,117 16,753 Shareholder loans 5,112 5,153 Total liabilities 27,825 32,212 Estimated surplus / (deficiency) (2,047) (21,951) Assets Please refer to our comments at section in relation to asset realisations. Liabilities Secured Lender The Secured Lender lodged an initial proof of debt for $12.1 million of which $3.7 million has been repaid to date. This repayment consisted of cash distributions together with the return of certain bank guarantees and the Arcadia letter of credit Employee claims The following employee entitlements have been paid to date: $000s Annual leave / Long service leave 662 PILN 378 Redundancy 609 Total 1,649 We will shortly be paying an estimated amount of $222,000 (plus any applicable general interest charges and administration fees) to the ATO in respect of the Company s Superannuation Guarantee Charge liability. Once these outstanding amounts have been paid, all employee entitlements will have been paid in full. 4

6 Voidable transactions Unfair preferences Section 588FA of the Act gives the Liquidators the power to recover certain transactions that have had the effect of conferring a priority, preference or advantage to a creditor within six months of the commencement of the winding up (the relation back period). Following our appointment as Liquidators, we conducted detailed investigations in relation to payments made around the time of the appointment of Administrators. From the information available to us, we do not anticipate recovering funds in relation to any unfair preference payments entered into by the Company. Uncommercial transactions Section 588FB of the Act requires the Liquidators to investigate transactions which may be deemed to be uncommercial, having regard to the detriment to the Company (if any) suffered as a consequence of the transaction in the period two years prior to the appointment. In addition, Section 588FDA of the Act refers to unreasonable director-related transactions and requires the Liquidators to investigate such transactions, having regard to the detriment to the Company (if any) suffered as a consequence of the transaction. From the information available to us, we do not anticipate recovering funds in relation to uncommercial transactions entered into by the Company. Unfair loans Section 588FD of the Act requires investigations of transactions which may be deemed to be unfair loans to the Company. A loan to the Company is considered to be unfair if and only if, interest on the loan is extortionate, or the charges in relation to the loan were extortionate. From the information available to us we have not identified any transactions which would constitute unfair loans to the Company. Voidable transactions related parties Section 588FE(4) of the Act requires investigations of transactions which may be deemed to be insolvent transactions with a related party entered into within 4 years of the commencement of the winding up. From the information available to us, we do not anticipate recovering funds in relation to any voidable transactions entered into by the Company with related parties. Other potential liquidator recoveries We have previously identified a potential claim which the Company may have under the terms of the franchise agreement with Arcadia. We are continuing to assess the merits of pursuing a possible claim against Arcadia. Insolvent trading Section 588G of the Act provides that directors are obliged to prevent a company from: Incurring a debt whilst insolvent; or Becoming insolvent by incurring a debt. If a contravention of Section 588G can be established, then Section 588M empowers Liquidators (or a creditor under certain circumstances) to recover compensation from a director for any loss or damage suffered as a consequence of any such contravention. 5

7 Indicators of insolvency Please refer to section 7 of our 439A Report for further details. Insolvent trading conclusion As noted in the 439A Report, we have determined that the Company was likely insolvent from at least 24 May 2017 being the date Arcadia advised that financial support was withdrawn. The Directors resolved to appoint Administrators later that day. Section 588H of the Act provides a number of statutory defences available to the Directors which would have to be considered in deciding whether to commence an insolvent trading action. In their defence the Directors could argue: The Directors had reasonable grounds at the time the debt was incurred to expect the Company was 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. Any decision to commence an action against the Directors for insolvent trading must have regard to the following: The costs of litigation and the unknown likelihood of success; The quantum of any potential claim The Director s capacity to meet a claim for compensation we have not undertaken further enquiries to ascertain what equity may exist to meet a claim for compensation for insolvent trading. Having regard to the above, we believe there is no commercial merit in pursuing an insolvent trading claim against the Directors. We note that Section 588R entitles creditors to commence proceedings under Section 588M against a director of a company subject to the consent of the Liquidators. Should creditors have any further information that may assist our investigations into the conduct of the Company s affairs, they should communicate details in writing to our office within 14 days from the date of this report. Should any creditor be willing to fund the costs and expenses to commence proceedings against the Directors or wish to discuss further, would you please contact Candice Ferreira of this office on (02) or Candice.ferreira@fh.com.au. 4 Return to creditors We estimate that the dividends payable to each class of creditor are as follows: Creditor class Priority employees Secured Unsecured Estimated dividend rate (cents in the $) 100 cents cents Nil The balance of funds available following the payment of outstanding employee entitlements and the costs of the liquidation will be applied to the debt due to the Secured Lender. As the proceeds will not be sufficient to discharge the Secured Lender s debt in full, there will not be funds available for a distribution to unsecured creditors. 6

8 5 Liquidators remuneration Creditors were advised that our estimated remuneration for the liquidation would be up to $180,810. This remuneration was approved at the meeting of creditors held on 18 October Liquidators remuneration of $117,831 has been drawn to date. Based on current information, we do not anticipate remuneration for the Liquidation period exceeding the amounts already approved. 6 Conclusion The following matters will continue to be progressed: Finalisation of remaining trading accounts; Payment of outstanding employee superannuation entitlements; and Attendance to ongoing statutory obligations. Upon receipt of a clearance from ASIC and completion of the above, it is our intention to proceed to finalise the liquidation and request ASIC to deregister the Company. We expect that these tasks will be completed within the next 6 months. Should you have any questions, please contact Candice Ferreira of this office on Dated this 17 th day of January 2018 Ryan Eagle Liquidator 7

9 Glossary Abbreviation Description ACN Australian Company Number Act The Corporations Act 2001 Arcadia Arcadia Group Ltd and its related entities ARITA Australian Restructuring Insolvency & Turnaround Association ASIC Australian Securities and Investments Commission Company Austradia Pty Limited (In Liquidation) Directors David Raymond Slade, Hilton Seskin, Patrick Francis Elliott and Richard William Amos Directors Statement Directors Statement received on 19 June 2017 pursuant to section 438B of the Act ERV Estimated Realisable Value Liquidators James Stewart, Ryan Eagle and Jim Sarantinos Myer Myer Pty Limited NAL Next Athleisure Pty Limited RATA Report as to Affairs Secured Lender Commonwealth Bank of Australia 439A Report Voluntary Administrators Report to Creditors dated 6 October

10 Annexure 9

11 A Receipts & Payments Total $'000 Opening cash at bank at 18 October ,046 Receipts Receipt of net sale proceeds from Administration period 833 Debtors 221 Pre-appointment cash at bank 50 GST 43 Plant and equipment 28 Other receipts 15 Total receipts 1,190 Payments Distribution to Secured Lender (500) Administrators and Liquidators fees and disbursements (467) PAYG withheld (229) Net trading proceeds to Arcadia (172) Shared services costs (150) Store costs (71) Payroll tax (38) Legal fees and disbursements (38) Other payments (22) Total payments (1,686) Cash at bank as at 6 January ,551 10