Restructuring, Turnaround and Insolvency Specialists

Case Studies

Receiver & Manager

Case Study 1 – Franchise Timber and Hardware retailer The company traded a franchise hardware and timber supply shore on the Mornington peninsula and had built up an excellent reputation in the community for having the outstanding customer service which was not found in other large warehouse hardware stores. A well known major competitor set up a similar and competitive store less than 1 km away from the company’s store and as a result, the sales gradually declined over a sustained period to the point where the company’s liabilities were unable to be met.  The funds owed to the secured creditor represented the appropriate franchise debt which was due and payable. Additionally, the rent required to maintain the business’ trading location was significant, however, the company was “locked into” the lease of the premises for at least a further twelve months.  Further, the secured creditor was guarantor to the lease agreement. The company traded under the control of the Receivers & Managers for seven months to maintain the image of the franchise and allowed for an orderly realisation of the stock on hand whilst not damaging the image and reputation of the head franchisor.  Additionally, during the time the company traded whilst in receivership, negotiations were underway with regards to a sale of the business operated by the company. Further, whilst the business was traded, the lease liability gradually declined as the Receivers & Managers were able to continue to make payments to the landlord, and reduce the debt to the guarantors of the lease contract. As a result of the appointment of the Receivers and Managers a return of approximately 30 cents in dollar was provided to the secured...

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Creditors’ Voluntary Liquidation

Case Study 1 – Multi State wind down Prior to liquidation the company had operations in Victoria and also regional (Newcastle) New South Wales.  Its financial operations were conducted in Victoria and its manufacturing was conducted in New South Wales.  Due to this we were dealing with employees and creditors from both states.  Apart from book debts the major asset of the company was its plant and equipment at its manufacturing site in Newcastle.  Upon appointment we immediately secured the plant and equipment.  Due to our knowledge of the industry we were able to work with a National firm of valuers and auctioneers who were able to co-ordinate the changing of locks and taking an inventory of the assets located in New South Wales and Victoria. We also met with the management team from Newcastle and ascertained the general manager (who was not a director or shareholder) was responsible and trustworthy and we retained his services to facilitate the sale of the assets. Initially it was thought that the assets would be sold by way of public auction and the premises vacated, however after advertising the business for sale as a whole we entered into negotiations and were able to successfully sell the business and its assets for considerably higher than auction realisation value. Whilst some employees were successful in obtaining employment with the purchaser the majority were not. However the sale price achieved will enable the claims of the employees, many of whom were longstanding employees with significant entitlements to receive the bulk of the monies outstanding including paying their superannuation entitlements in full.  The employee entitlements including superannuation amount to approximately $350,000. Prior to settling the sale negotiations we had to deal with various issues including retention of title claims on various assets, resolve a dispute in relation to the ownership of intellectual property and have all the plant and equipment inspected so as to comply with the relevant occupational health and safety requirements.  In order to avoid long and costly litigation we settled with the various parties claiming retention of title and ownership of intellectual property on a commercial basis which allowed the sale to proceed, the monies collected and the small amount required to be paid to the various parties to settle the disputes was considerably less than if we had have litigated the matter when taking into consideration the costs of litigation, the delay caused and the fact that we would have lost the opportunity to sell the assets for a higher price than...

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Voluntary Administration

Case Study 1 – The Printing Company (wind-down) The company was incorporated during March 1967 and operated a small printing business which had been handed down generations from father to son. The company operated the business from leased premises in the eastern suburbs. The company was losing clients as it was unable to keep up with it’s larger competitors with regards to client cost structuring.  The company also operated in a niche market which was previously dealt with by smaller companies such as this one as the larger printing companies were unable to cost effectively service this niche market.  With the development and advancement of technology the large franchise printing companies were able to service the niche market customers for competitive prices. The administration provided a stepping stone to the liquidation of the company which allowed for an orderly winding up of the company’s affairs and achieved the best return to all creditors. The assets of the company were sufficient enough to discharge the debt owed to the secured creditor, provide a return of 100 cents in the dollar to the priority creditors (employee entitlements and superannuation) and a return of 18 cents to the ordinary unsecured creditors of the company. Case Study 2 – The Trading Supplier The company carried on the business of distributing and manufacturing blinds. Upon my appointment I held negotiations with a number of parties who had expressed an interest in the business.  These negotiations covered various rescue packages, no scenario was ignored and all options were fully investigated.  Options considered included, an equity partner, injections of capital and the sale of the business.  The rescue packages and various scenario’s were placed under time constraints as the company had insufficient funds to continue to meet the demands of trading the business and the employees were stood down with pay until an arrangement could be met. As a result of the company having insufficient funds to trade whilst I was appointed, I had to consider several options for the company to meet current orders, to maximise the return to creditors, including various suppliers operating the business under a licensing agreement.  Further, the timeliness of the sale meant that sale of asset documents need to be drafted and executed in a timely manner.  I used external lawyers to prepare all sale and license documents necessary. As a result of these activities I was able to secure a Contract of Sale of the business of the company and the contract was executed on 12 May 2006, prior to my report pursuant to section 439A(4) being sent to creditors.  Further, this enabled the business of the company to continue to trade and I note this approximately doubled the return to the ordinary unsecured creditors under a “shut down” scenario.  Further, the Retention of Title stock of the company was not included in the sale and was able to be returned to the suppliers, despite some claims being poorly worded and I would have had to defend our right to the stock under a “shut down” scenario, however the commercial decision in the event of the sale was to return all stock that was claimed under Retention of Title. Broadly speaking the unconditional sale of business agreement provided for the payment of a purchase price of $1.8 million payable over a period...

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Deed of Company Arrangement

Case Study 1 – The Christmas Tree Company The company operated a seasonal Christmas Tree farm from the directors’ personal residence.  During one particular season the stock of trees to be sold were poorly shaped, and consequently, the stock undersold the initial and subsequent assessments determined by the directors.  Given this, the expenses and costs incurred by the company were unable to be met. Additionally, the company’s income was solely generated from the sale of it’s Christmas Tree stock during November and December annually with the debtors created from this income stream being realised through late December to early February annually. The company had minimal ongoing expenses, including, rent, power, wages and had minimal purchasing requirements.  The creditors of the company included a secured creditor, some employee entitlements (due on termination), unsecured creditors and a few lease companies.   Additionally, the company had neglected to remit statutory payments such as Superannuation Guarantee Contributions and PAYG withholding. Upon the appointment of the administrators, the company and it’s directors were able to assess whether the underlying business operated by the company was viable and was able to be revived.  The appointment also allowed them to determine whether they were in a position to put forward an proposal for a Deed of Company Arrangement for creditors consideration. The directors arranged the sale their personal residence.  The funds provided at the settlement of this property discharged the company’s indebtedness to the secured creditor and provided sufficient funds to enable a proposal for a Deed of Company Arrangement to be put forward for creditors’ consideration. The funds available to creditors from the Deed of Company Arrangement provided a return of 22.904 cents in a dollar to the ordinary unsecured creditors, a return which would not otherwise definitely be available in a liquidation scenario.  The debt owed to the secured creditor was discharged by the sale of the directors’ personal residence. Case Study 2 – The Printing Company The company had been operating a digital printing business for a number of years at various locations for several years.  They had expanded their business across several stores at various locations. Several years ago the company entered into a significant number of hire purchase and operating lease agreements with a major supplier of digital printing equipment.  The company ran into difficulty with the high ongoing rental and lease charges which it had agreed to enter into. Additionally, the company had neglected to remit statutory payments such as Superannuation Guarantee Contributions and PAYG withholding. The appointment of the Administrators enabled the company to continue to trade and provided them with sufficient time during which to assess whether:- their underlying business was viable, review their internal costs and expense structures, whether to inject further capital, and; whether they were in a position to put forward a proposal for a Deed of Company Arrangement. The directors of the company concluded positively with regards to the above and put forward a proposal for a Deed of Company Arrangement that allowed the company to reduce it’s costs, provide a return to the creditors which would not otherwise be available in a liquidation scenario.  The proposal also gave both the company, and the significant creditor the opportunity to re-assess the agreements entered into between the parties. The debt to the secured creditor was fully discharged via the...

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Official Liquidation

Case Study 1 – The Reigonal Services Company The business of the company operated as an earthmoving equipment importer and on seller, as well as completing contracted earthmoving tasks in the Bendigo and Regional areas. Upon our appointment we immediately located the company’s contact details and made brief contact with the director.  The director initially refused to speak with us.  So we then attended the principle place of business as per the Australian Securities and Investments Commission (“ASIC”) database, in Bendigo, Victoria to investigate the affairs of the company and secure any assets.  Whilst in Bendigo we also located the company’s accountant via the registered office who was able to provide assistance and open a dialog with the director.  We note that we were unable to locate the director in the initial stages, however, with ASIC’s and the company’s accountant assistance we were able to locate and question the director. We note that our initial investigations identified some of the items of earthmoving plant and equipment were located at a Melbourne based plant and equipment auctioneer and we were able to secure these assets for the benefit of creditors. Further, we note the director advised that the former director, and former partner in the business, had possession of a leased company vehicle (no equity was determined in the vehicle) had claimed to be in satisfaction of a director’s loan account, which was recovered for the benefit of ordinary unsecured creditors, as it reduced the claim of the lessor.  The return to the creditors in this administration was approximately 52 cents in the...

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Part X (Personal Insolvency Arrangement)

Case Study 1 – The Doctor A prominent medical practitioner had an accumulation of debt from unsuccessful legal actions over a period of many years. The debtor was unable to pay or come to an arrangement with all of his creditors privately.  A Part X Arrangement (now Personal Insolvency Arrangement) was undertaken to present the formal options to creditors.  A Deed of Arrangement put forward by the debtor and was agreed to by creditors.  This Deed of Arrangement allowed the debtor to continue his professional qualifications and also to act as a director of corporate entities to earn income with which to repay creditors. It was likely that in a bankruptcy scenario there would have most likely been no return to the creditors in this estate. The Deed of Arrangement (now Personal Insolvency Arrangement) proposed by the debtor provided a return of 100 cents in the dollar to priority creditors (employee entitlements) and a return of 3.2 cents in the dollar to the ordinary unsecured creditors.  Both of these returns would most likely not have been available in a bankruptcy...

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