Restructuring, Turnaround and Insolvency Specialists

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 creditor.

 

Liability limited by a scheme approved under Professional Standards Legislation