Second Meeting of Creditors

Transcription

1 DRAFT Red Lea Chickens Orlc 92 Red Lea Franchise Red Lea Franchising Red Lea Logistics Red Lea Leasing Red Lea Hatchery Red Lea Feed Red Lea Corrugation & Flexo Red Lea Retail Holding (All Administrators Appointed) Second Meeting of Creditors 9 July 2018 (collectively the Red Lea Group )

2 Agenda Introduction Meeting formalities and overview of voting process Overview of the Red Lea Group Overview of the Voluntary Administration Purpose of meetings Meetings to be held concurrently Voluntary Administration of the Red Lea Group Events leading to the Voluntary Administration Administrators actions to date Financial position and performance Reasons for failure Investigations Proposed Deed of Company Arrangement Return to creditors Administrators recommendation for the future of the Red Lea Group Administrators remuneration Questions 2

3 Meeting formalities Open meeting Administrator Chairperson: IPR Introductions Barry Kogan (Administrator) Kathy Sozou (Administrator) Jonathon Henry (McGrathNicol Partner) Cameron Cheetham (Corrs Chambers Westgarth) Attendance register Quorum: IPR Time and place convenient: IPR Administrators report to creditors pursuant to IPR ( the Administrators Report ) Proofs of debt and proxies DIRRI Voting 3

4 Voting Voting can be done on the voices (i.e. by show of hands) or by a poll Each creditor can only vote in the entity they are a creditor of, you will have received coloured slips at sign-in Red Lea Group entity Red Lea Chickens Orlc 92 Red Lea Franchise Red Lea Franchising Red Lea Logistics Red Lea Leasing Red Lea Hatchery Red Lea Feed Red Lea Corrugation & Flexo Red Lea Retail Holding Colour of voting slip Light pink Light green Light blue Red Yellow Bright pink Bright green Light purple Light orange Bright orange 4

5 Voting How to vote On the voices Hold up voting slip By poll On your voting slip, tick In favour of or Against, add your name and (for proxy holders) the creditor you represent Hand voting slip to Administrators staff Voting via proxy Each creditor/proxy holder in the room gets one vote, regardless of how many proxies they hold General proxies: fill in a voting slip for each general proxy you hold Special proxies: we already have your creditor s vote (provided in advance or at sign-in) How the resolution is passed When more creditors/ proxy holders vote for it than vote against it When more creditors (either in the room or via proxy) vote for it than vote against it AND When those who vote for it are owed a greater amount of money than those who vote against it 5

6 Overview of the Red Lea Group Asif family and related interests RL Property Holding plus eight subsidiaries Redlea Group Holding Red Lea Chickens Red Lea Leasing Red Lea Logistics Red Lea Franchise Red Lea Franchising Red Lea Retail Holding ORLC 92 Red Lea Hatchery Red Lea Feed Red Lea Corrugation & Flexo Subject to appointment of Voluntary Administrators Two wholly owned subsidiaries 6

7 Overview of the Voluntary Administration Appointment Moratorium period Outcome of VA 29 March 12 April 2 May 3 May 20 June 2 July 9 July VA s appointed First meeting of creditors First meeting of COI Court granted extension of convening period Second meeting of the COI Report to creditors issued Second meeting of creditors Week one May Mid-May 20 June 6 July Immediate shut down of operations and sale of livestock Ongoing employee entitlements review PPE auction Settlement with franchisees $15M received into trust account 7

8 Purpose of meetings The Red Lea Group enter into a Deed of Company Arrangement The Red Lea Group enter liquidation The Red Lea Group be returned to the Current Director 8

9 Resolution meetings to be held concurrently That the meetings of creditors of each of the Red Lea Group entities, being Red Lea Chickens Pty Ltd Orlc 92 Pty Ltd Red Lea Franchise Pty Ltd Red Lea Franchising Pty Ltd Red Lea Logistics Pty Ltd Red Lea Leasing Pty Ltd Red Lea Hatchery Pty Ltd Red Lea Feed Pty Ltd Red Lea Corrugation & Flexo Pty Ltd Red Lea Retail Holding Pty Ltd (all Administrators Appointed) be held concurrently. 9

10 Events leading to the Voluntary Administration Acquisition Asif family ownership VA appointment Apr 2015 $30m Acquisition by the Asif family Jul 2016 Acquisition transaction finalised Early 2016 Logistics and retail entities created Late 2016 Asif family took over day to day mngt Mar 2017 Offered business for sale Jun 2017 Trading loss of $20.6m Feb 2018 YTD trading loss of $19.1m Jun 2015 Trading loss of $1.7m Jan 2016 Major customers enter insolvency, $4m bad debt Jun 2016 Trading loss of $0.2m Dec 2016 Stat demand served, key suppliers required COD Apr 2017 Debtor finance facility entered into 29 Mar 2018 VA s appointed 10

11 Administrators actions to date Statutory obligations Discontinuing of operations Employees Creditors Investigations & DOCA proposal 11

12 Financial performance trading companies Statement of financial performance $ m FY15 FY16 FY17 YTD18 Sales COGS (165.2) (166.0) (167.9) (83.0) Gross profit (1.1) Gross margin 5.9% 6.3% 2.3% (1.4%) Other income Expenses (12.6) (11.5) (25.6) (18.0) Operating profit (loss) (1.7) (0.2) (20.6) (19.1) Loss making from FY15 (and likely earlier), with a trading loss of $19.1 million YTD18 Source: unaudited management accounts 12

13 Financial performance trading companies Statement of financial performance $ m FY15 FY16 FY17 YTD18 Sales COGS (165.2) (166.0) (167.9) (83.0) Gross profit (1.1) Gross margin 5.9% 6.3% 2.3% (1.4%) Other income Expenses (12.6) (11.5) (25.6) (18.0) Operating profit (loss) (1.7) (0.2) (20.6) (19.1) Introduction of RL Logistics and RL Retail significantly increased expenses Source: unaudited management accounts 13

14 Financial position trading companies Statement of financial performance $ m Jun-15 Jun-16 Jun-17 Feb-18 Current assets Non-current loans to related parties PPE and other Total assets Current liabilities (31.1) (36.9) (50.2) (49.2) Employee entitlements and other (2.2) (0.8) (0.5) (1.2) Non-current loans from related parties - (0.8) (34.7) (44.7) Non-current loans from third parties (13.1) (19.0) - (7.7) Total liabilities (46.5) (57.4) (85.4) (102.9) Net assets (25.1) Impact of acquisition transaction Source: unaudited management accounts 14

15 Financial position trading companies Statement of financial performance $ m Jun-15 Jun-16 Jun-17 Feb-18 Current assets Non-current loans to related parties PPE and other Total assets Current liabilities (31.1) (36.9) (50.2) (49.2) Employee entitlements and other (2.2) (0.8) (0.5) (1.2) Non-current loans from related parties - (0.8) (34.7) (44.7) Non-current loans from third parties (13.1) (19.0) - (7.7) Total liabilities (46.5) (57.4) (85.4) (102.9) Net assets (25.1) Increased reliance on related party funding Source: unaudited management accounts 15

16 $'m Intercompany loans Funds advanced to RL Chickens via Redlea Group Holding Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Feb-18 RL Chickens received more funds from Redlea Group Holding than it returned Source: company books and records 16

17 Reasons for failure The Group was loss making Inadequate capital structure Complex industry dominated by a number of key parties 17

18 Investigations Claims available in a liquidation c. $25M Transfer of assets Unreasonable director related transactions Insolvent trading Voidable transactions Discharge of Directors duties Significant litigation and delay risk 18

19 Investigations Asif family 100% 21% (intended but never occurred) Velcich family Redlea Group Holding Pty Ltd 100% Red Lea Chickens Pty Ltd Transfer of property and fixed assets Transfer of business operations 100% ORLC 92 Pty Ltd 19

20 Investigations Claims available in a liquidation c. $25M Transfer of assets Unreasonable director related transactions Insolvent trading Voidable transactions Discharge of Directors duties Significant litigation and delay risk 20

21 Proposed Deed of Company Arrangement DOCA Proposal from Redlea Group Holding - $16.5M $16.5M in funding assured Secured Creditors and related parties do not claim, and claims against them released Red Lea Chickens and ORLC 92 required to participate Employees paid in full in three business days (excluding superannuation) Unsecured creditors estimated to receive 12 to 15 cents in the dollar Pooled assets and claims 21

22 Return to unsecured creditors Return to Outcome Creditor claims Employee claims Costs Funds required unsecured creditors DOCA 15 cent dividend $3M (based on $20M unsecured creditors) $10.5M $3M (Administrators and legal costs) $16.5M Liquidation 15 cent dividend $7.5M (based on $50M unsecured creditors) $10.5M $11M (Administrators and legal costs) $16M (35% of recoveries to litigation funder) $45M DOCA 1c is $200,000 Liquidation 1c is $500,000 Liquidation recoveries need to be three times higher than DOCA fund Estimated liquidation recoveries are currently c. 25M 22

23 Outcome by class of creditor DOCA Liquidation Employees Paid in full, including super Subject to FEG Unsecured creditors Return of 12 to 15 cents Less than 10 cents, with significant risk and delay Secured creditors Excluded from DOCA Partial return Related parties Excluded from DOCA Less than 10 cents, with significant risk and delay 23

24 Recommendation The DOCA Proposal provides a more certain, timely and superior return to creditors than a liquidation 24

25 Questions

26 Voting Voting can be done on the voices (i.e. by show of hands) or by a poll Each creditor can only vote in the entity they are a creditor of, refer Red Lea Group entity Red Lea Chickens Orlc 92 Red Lea Franchise Red Lea Franchising Red Lea Logistics Red Lea Leasing Red Lea Hatchery Red Lea Feed Red Lea Corrugation & Flexo Red Lea Retail Holding Colour of voting card Light pink Light green Light blue Red Light orange Bright pink Bright green Light purple Yellow Bright orange 26

27 Voting How to vote On the voices Hold up voting slip By poll On your voting slip, tick In favour of or Against, add your name and (for proxy holders) the creditor you represent Hand voting slip to Administrators staff Voting via proxy Each creditor/proxy holder in the room gets one vote, regardless of how many proxies they hold General proxies: fill in a voting slip for each general proxy you hold Special proxies: we already have your creditor s vote (provided in advance or at sign-in) How the resolution is passed When more creditors/ proxy holders vote for it than vote against it When more creditors (either in the room or via proxy) vote for it than vote against it AND When those who vote for it are owed a greater amount of money than those who vote against it 27

28 Enter into Deed of Company Arrangement That, enter into the proposed Deed of Company Arrangement with Barry Kogan, Kathy Sozou and Jason Preston being appointed as the Joint and Several Deed Administrators. Red Lea Chickens Pty Ltd Orlc 92 Pty Ltd Red Lea Franchise Pty Ltd Red Lea Franchising Pty Ltd Red Lea Logistics Pty Ltd Red Lea Leasing Pty Ltd Red Lea Hatchery Pty Ltd Red Lea Feed Pty Ltd Red Lea Corrugation & Flexo Pty Ltd Red Lea Retail Holding Pty Ltd 28

29 Remuneration 29 March 2018 to 1 June 2018 That the remuneration of the Voluntary Administrators of (Voluntary Administrators Appointed), for the period 29 March 2018 to 1 June 2018, calculated at hourly rates as detailed in the circular to creditors dated 5 April 2018, is approved for payment in the sum of $, plus GST and disbursements, and the Voluntary Administrators may pay the remuneration immediately or as otherwise determined by the Voluntary Administrators. Summary of resolutions Red Lea Chickens Pty Ltd 1,012,901 (approved by COI on 20 June 2018) Orlc 92 Pty Ltd 2,218 Red Lea Franchise Pty Ltd 48,016 Red Lea Franchising Pty Ltd 12,086 Red Lea Logistics Pty Ltd 23,659 Red Lea Leasing Pty Ltd 11,970 Red Lea Hatchery Pty Ltd 2,218 Red Lea Feed Pty Ltd 2,218 Red Lea Corrugation & Flexo Pty Ltd 2,218 Red Lea Retail Holding Pty Ltd 12,334 29

30 Remuneration 2 June 2018 to later of second creditors meeting and execution of a DOCA That the future remuneration of the Voluntary Administrators of (Voluntary Administrators Appointed), from 2 June 2018 to the later of the second creditors meeting or the execution of a DOCA, calculated at the hourly rates as detailed in the circular to creditors dated 5 April 2018, is approved up to a capped amount of $, exclusive of GST, and the Voluntary Administrators may pay the remuneration as and when it is incurred from funds under their control. Summary of resolutions Red Lea Chickens Pty Ltd 690,344 (approved by COI on 20 June 2018) Orlc 92 Pty Ltd 25,015 Red Lea Franchise Pty Ltd 44,665 Red Lea Franchising Pty Ltd 19,810 Red Lea Logistics Pty Ltd 25,450 Red Lea Leasing Pty Ltd 10,070 Red Lea Hatchery Pty Ltd 9,895 Red Lea Feed Pty Ltd 9,895 Red Lea Corrugation & Flexo Pty Ltd 9,895 Red Lea Retail Holding Pty Ltd 25,450 30

31 Remuneration period of DOCA That the initial remuneration of the Deed Administrators of (to be Subject to Deed of Company Arrangement), for the period of the DOCA, calculated at the hourly rates as detailed in the circular to creditors dated 5 April 2018, is approved up to a capped amount of $, exclusive of GST, and the Deed Administrators may pay the remuneration as incurred on a monthly basis or as otherwise determined by the Deed Administrators. Summary of resolutions Red Lea Chickens Pty Ltd 307,020 Orlc 92 Pty Ltd 16,475 Red Lea Franchise Pty Ltd 29,225 Red Lea Franchising Pty Ltd 17,735 Red Lea Logistics Pty Ltd 29,225 Red Lea Leasing Pty Ltd 17,735 Red Lea Hatchery Pty Ltd 13,365 Red Lea Feed Pty Ltd 13,365 Red Lea Corrugation & Flexo Pty Ltd 13,365 Red Lea Retail Holding Pty Ltd 42,505 31

32 Questions

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