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Discount chain's rescue remains work in progress

3 Jan 2013 SYDNEY MORNING HERALD
BY COLIN KRUGER


THE supposedly viable core of the collapsed discount chain Retail Adventures "requires further restructuring to become profitable", its administrators told creditors at a meeting last month, while revealing further store closures and job losses.

Documents lodged by the administrators with the Australian Securities and Investments Commission (ASIC) reveal that further restructuring is being undertaken by Kathmandu's founder, Jan Cameron, who acquired the business out of receivership in 2009 but was forced to appoint administrators in November after losses mounted.

She continues to run the business under licence from the administrators while a sales process is conducted.

The number of employees being made redundant has increased from the initial estimate of 630 to 763 actual job losses as of the week before Christmas when the second meeting of the creditors' committee was held.

Vaughan Strawbridge, who leads the team of administrators from Deloitte, also revealed they were investigating an unspecified number of transactions executed before their appointment. No further details were available from the administrators on Wednesday.

There was some good news. The administrators reported most key suppliers were back on board and current commitments for new stock exceed $58 million.

Disclaimed leases, mostly relating to parts of the business no longer in operation, are expected to generate annualised savings of about $14.4 million.

Ms Cameron's operating company, RSG, initially took over the running of 238 viable stores - employing 5000 staff - under licence from the administrators in November.

The administrators reported a further 14 stores face closure and are under review to assess their viability.

It is not known if the sales process under way will recover enough to pay Ms Cameron's secured loans and employee entitlements, let alone the $100 million-plus owed to the company's suppliers.

Ms Cameron acquired the Retail Adventures business out of receivership for $70 million in 2009, and has secured loans totalling $80 million from funding she provided as the business ran up losses totalling $110 million in the three years she ran it.

"We are confident Jan Cameron has the ability to run the business forward," said the administrators in the report, which defended the licensing agreement with Ms Cameron, who has provided a further $32.8 million to keep the business operating.

According to the administrators' report, $7 million remains available to cover future commitments.

Ms Cameron is one of two potential buyers of the Retail Adventures business in its entirety with another 10 potential buyers expressing interest in acquiring various parts of the business.

The administrators have yet to reveal details of their investigation into the affairs of Retail Adventures, including whether there was any breach of directors' duties, unfair preferential payments or trading by the company while insolvent.

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