First Meeting of Creditors

Transcription

1 DRAFT Red Lea Chickens Pty Ltd First Meeting of Creditors Orlc 92 Pty Ltd 12 April 2018 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) (collectively the )

2 Agenda Formalities Resolution (concurrent meetings) Purpose of meeting Purpose of administration Background Financial position and performance Administrators actions since appointment Wind down strategy and asset realisation Employees Investigations DOCA v Liquidation Indicative DOCA Questions Resolutions (Committee and replacement of Voluntary Administrators) 2

3 Formalities Open meeting Administrator Chairperson: IPR Introductions: Barry Kogan (Administrator) Jonathan Henry (McGrathNicol Director) Cameron Cheetham (Corrs Chambers Westgarth) Quorum: IPR Attendance register Voting Time and place convenient: IPR Proofs of debt and proxies 3

4 Resolution meetings to be held concurrently That the meetings of creditors of each of the companies, 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 Retail Holding Pty Ltd Red Lea Corrugation & Flexo Pty Ltd (All Administrators appointed) be held concurrently. 4

5 Purpose of meeting Convened under Section 436E of the Corporations Act to: determine whether to appoint a Committee of Inspection to each Company, and if so, who are to be the Committees members; and consider the removal of the Administrators and appoint an alternative Administrator who has consented to act This meeting has no authority to consider any other business At the second statutory meeting, a decision is made regarding the Red Lea Group s future 5

6 Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) and remuneration DIRRI DIRRI dated 29 March distributed with notice of meeting DIRRI is available for inspection We remain of the view that we are free of any potential conflict of interest $500,000 cash indemnity received on 3 April 2018 from a related company, Red Lea Holdings Pty Ltd DIRRI tabled Remuneration Schedule of rates provided with meeting information Comprehensive remuneration report will be provided prior to the second meeting of creditors 6

7 Purpose of administration Directors powers are suspended and Administrators are in control Voluntary Administration provides moratorium period for investigation / determination of companies future: Return company to Director; Deed of Company Arrangement; and Liquidation. 7

8 Voluntary Administration timeline VA appointed 29 March 2018 Within 8 business days 12 April 2018 Within 20 business days 7 May 2018 Within 25 business days 14 May 2018 Administrators take control of Red Lea Group and its assets 1 st meeting of creditors held Purpose: Complete preliminary investigation 2 nd meeting of creditors held Options: Written notice of first meeting mailed to creditors and employees on 7 April 2018 (i) Replace VA (ii) Consider the appointment of a Committee of Inspection Receive any DOCA proposals Issue Administration Report and form opinion as to future of the Red Lea Group (i) DOCA (ii) Liquidation (iii) Return to director The Easter holiday period impacted the Voluntary Administration timeline 8

9 Background Founded in Western Sydney in 1957 Processing plant in Blacktown, NSW The Asif family acquired the Group in 2015 Significant losses post acquisition, funded by related parties and debt Key activities: Management of farming operations and livestock grower network; Processing of chicken livestock into wholesale and retail chicken products; Distribution of chicken products to retailers and wholesale customers; and Operation and management of retail and franchise network. 9

10 Timeline April 2015 $30m Acquisition by the Asif family July 2016 Properties transferred out of operating entities Early 2016 Logistics business commenced (brought inhouse) and retail business commenced Late 2016 Asif family took over day to day management Dec 2016 Statutory demand served, leading to major suppliers requiring COD April 2017 Working capital challenges addressed through debtor finance Late 2017 YTD18 trading loss of $17.2m June 2015 Net profit of $3.9m Jan 2016 Major customers enter into insolvency, $4m bad debt exposure June 2016 Net profit of $2.0m March 2017 Offered business for sale, process was unsuccessful June 2017 Net loss of $17.5m 29 Mar 2018 Voluntary Administrators appointed 10

11 Corporate structure Hequ Trading Pte. Ltd (Singaporean entity) Assad Ullah Asif (45%) Muhammad Asif (45%) Fatima Batool (10%) Redlea Group Holding Pty Ltd Red Lea Chickens Pty Ltd Red Lea Logistics Pty Ltd Red Lea Franchise Pty Ltd Red Lea Franchising 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 Orlc 92 Pty Ltd Appointment group Main Trading Entity Logistics Entity Stores and Franchise Network Largely Dormant Entity Shareholders

12 Secured creditors: $12m Operations Operations and assets Creditors Red Lea Chickens Red Lea Retail and Franchise Main trading entity and processing facility Employed majority of the staff Management of farming operations 7 company owned stores 22 franchise stores Trade creditors: c.$15m Employee creditors: $9.7m Trade creditors: c.$7m Employee creditors: c.$0.4m Red Lea Logistics Logistics and distribution to support operations c.70 vehicles Trade creditors: c.$1.3m Employee creditors: c.$0.2m Finance lease: c.$7m 12

13 Financial performance trading companies Summary Profit and Loss for the period 1 July 2017 to 28 February 2018 Franchise & Red Lea Red Lea Red Lea $m Chickens Logistics Franchising Total Total revenue Cost of sales (79.7) (3.3) (0.1) (83.2) Gross margin (8.5) (7.2) Net other expenses (8.5) (1.2) (0.3) (10.0) Profit/(Loss) before interest and taxation (17.0) (0.8) 0.6 (17.2) Source: Management Accounts, MCN normalisation adjustments 13

14 Financial position trading companies Summary Balance Sheet as at February 2018 Red Lea $m Red Lea Chickens Red Lea Logistics Francise & Red Lea Franchising Total Assets Inventory Trade debtors Less: Receivables finance (7.2) - - (7.2) Motor vehicles GST and other receivables Total Assets Liabilities Trade creditors (17.1) (1.2) (0.0) 9.5 Employees (5.3) (0.2) (0.1) (5.5) Secured creditors (3.9) (7.3) - (11.2) Total Liabilities (26.3) (8.6) (0.1) (7.3) Net Assets/(Liabilities) (17.1) (0.5) 0.1 (17.6) Source: Management Accounts, MCN normalisation adjustments 14

15 Administrators actions since appointment Secured and insured site Attended to wind-down of trading operations (leases, staff, assets) Communicated with employees Commenced investigations and secured records Reviewed secured creditor position 15

16 Wind down strategy Limited funding to continue to trade the business: Livestock realised Stock sold Staff made redundant Fixed assets valued Company owned stores closed Franchise stores operate independently

17 Employees 400 people employed upon appointment Majority of staff made redundant Over $10m of entitlements owed: Type of entitlement Estimate ($m) Superannuation 1.6 Annual leave 2.1 Long service leave 1.7 Pay in lieu of notice 1.3 Redundancy 3.7 Total

18 Employees (cont d) Separation Certificates sent to all employees Retained c.30 staff to assist Administrators Continued engagement with employees providing: updates on creditors meetings; third parties employment opportunities; and draft employee entitlements calculations Employee counselling session after meeting Ongoing liaison with Patricia Fernandez of the Australasian Meat Industry Employees Union 18

19 Investigations The Administrators are investigating the reasons for the Companies failure and the conduct of the Directors. We have secured company records including electronic data and s. Key lines of enquiry include: Transfer of real estate, fixed assets and motor vehicles Related party transactions and loan accounts Insolvent trading (19 statutory demands since the beginning of 2017) Discharge of Directors duties Voidable transactions Preference payments Transactions at undervalue 19

20 Liquidation vs Deed of Company Arrangement Deed of Company Arrangement ( DOCA ) Liquidation A DOCA is a binding arrangement between a company and its creditors. We have been advised that the Director intends to propose a DOCA. We expect to receive this proposal in the next week or so, and will report on it prior to the second meeting. At the second meeting, creditors may vote for the liquidation of the Companies. Voidable transactions can be pursued in liquidation. Employees may access the Fair Work Entitlements Guarantee Scheme ( FEG ). In our report to creditors, we will either recommend the DOCA or liquidation. The Administrators are preparing for either outcome. 20

21 Indicative DOCA terms (submitted by Director) Structure: DOCA contributions to be paid from Holdings Pty Limited; Creditor payments: Secured creditors: full repayment Employee entitlements: full repayment Unsecured creditors: some return Related parties: claims deferred (to increase return to other creditors) Various releases of Directors/related parties. Timing: Funding in place in the near future; Potential for funds to be placed on trust prior to the Administrators report; Employee dividend paid as soon as possible after DOCA execution; Unsecured dividend to follow thereafter; and DOCA ends after unsecured dividend paid. 21

22 Q & A

23 Resolutions Committee of Inspection Role: consult with the Administrators about matters relating to the administration; receive and consider reports by the Administrators; and approve Administrators fees 23

24 Resolutions Committee of Inspection Red Lea Chickens Resolution Committee of Inspection (if required) That: be appointed to the Committee of Inspection of Red Lea Chickens Pty Ltd (Administrators Appointed). 24

25 Resolutions Committee of Inspection Orlc 92 Resolution Committee of Inspection (if required) That: be appointed to the Committee of Inspection of Orlc 92 Pty Ltd (Administrators Appointed). 25

26 Resolutions Committee of Inspection Red Lea Franchise Resolution Committee of Inspection (if required) That: be appointed to the Committee of Inspection of Red Lea Franchise Pty Limited (Administrators Appointed). 26

27 Resolutions Committee of Inspection Red Lea Franchising Resolution Committee of Inspection (if required) That: be appointed to the Committee of Inspection of Red Lea Franchising Pty Ltd (Administrators Appointed). 27

28 Resolutions Committee of Inspection Red Lea Logistics Resolution Committee of Inspection (if required) That: be appointed to the Committee of Inspection of Red Lea Logistics Pty Ltd (Administrators Appointed). 28

29 Resolutions Committee of Inspection Red Lea Leasing Resolution Committee of Inspection (if required) That: be appointed to the Committee of Inspection of Red Lea Leasing Pty Ltd (Administrators Appointed). 29

30 Resolutions Committee of Inspection Red Lea Hatchery Resolution Committee of Inspection (if required) That: be appointed to the Committee of Inspection of Red Lea Hatchery Pty Ltd (Administrators Appointed). 30

31 Resolutions Committee of Inspection Red Lea Feed Resolution Committee of Inspection (if required) That: be appointed to the Committee of Inspection of Red Lea Feed Pty Ltd (Administrators Appointed). 31

32 Resolutions Committee of Inspection Red Lea Corr. & Flexo Resolution Committee of Inspection (if required) That: be appointed to the Committee of Inspection of Red Lea Corrugation & Flexo Pty Ltd (Administrators Appointed). 32

33 Resolutions Committee of Inspection Red Lea Retail Hlding Resolution Committee of Inspection (if required) That: be appointed to the Committee of Inspection of Red Lea Retail Holding Pty Ltd (Administrators Appointed). 33

34 Resolutions Replacement of Voluntary Administrator Resolution replacement of Voluntary Administrator (if required) That Barry Kogan, Jason Preston and Kathy Sozou are replaced as administrators of the Red Lea Group and is/are appointed as Voluntary Administrators of the. 34

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