Administrators query on Retail Adventures' solvency
A meeting of the company's creditors committee was told last month that the administrators, led by Deloitte's Vaughan Strawbridge, are investigating "whether or not the company was insolvent" at the time charges over the company's assets were granted to Ms Cameron in July 2011. The company went into administration in October 2012.
The administrators are also investigating two payments to "related creditors" the month Retail Adventures collapsed, according to documents lodged with the Australian Securities and Investments Commission.
"The administrators' investigations continue, particularly in relation to recoveries that could be available in respect of preference payments that may have been made," the report said. The administrators' investigations would be critical in determining whether there is legal action worth pursuing - in liquidation - on behalf of 1700 creditors owed $270 million.
Ms Cameron is expected to offer a deed of company arrangement as an alternative to liquidation.
She bought the Retail Adventures business out of receivership for $80 million in 2009, and has secured loans totalling $77 million from funding she provided as the business lost $110 million in the three years she ran it. She is using part of her $77 million secured debt to acquire the business back from the administrators for $59 million. Unsecured creditors, owed $165 million, stand to receive nothing from the sale.
Another company owned by Ms Cameron, DSG has run the business on behalf of the administrators. It will now own and run the restructured operation.
Administrators have said there might be grounds to reduce Ms Cameron's secured debt from $77 million to $27 million, in which case the balance of what DSG owes on the transaction would be paid in cash.
Frequently Asked Questions about this Article…
Administrators led by Deloitte's Vaughan Strawbridge are investigating whether Retail Adventures was insolvent more than a year before it collapsed. They are reviewing the timing of charges over the company's assets (granted in July 2011) and events leading to the October 2012 administration to determine if there were recoverable issues.
Jan Cameron, founder of Kathmandu, originally bought Retail Adventures out of receivership for $80 million in 2009 and supplied loans totalling $77 million while she ran the business. She is buying the business back from the administrators (using part of that secured debt) for $59 million, and another company she owns, DSG, has run the business for the administrators and will now own and operate the restructured business.
Documents lodged with ASIC show administrators are investigating two payments made to 'related creditors' in the month Retail Adventures collapsed. They are assessing whether those were preference payments and whether recoveries can be sought that would benefit the wider creditor pool.
A DOCA is an alternative to liquidation that sets out how a company’s affairs will be dealt with. The article says Jan Cameron is expected to offer a DOCA as an alternative to liquidation, which could determine how much (if anything) different classes of creditors receive compared with outright liquidation.
Unsecured creditors, who are owed about $165 million, are reported to stand to receive nothing from the sale. Administrators have also indicated there may be grounds to reduce Ms Cameron’s secured debt from $77 million to $27 million — if that happens, the remaining balance DSG owes on the transaction would be paid in cash.
The administrators’ report notes about 1,700 creditors are owed roughly $270 million in total. Jan Cameron’s ownership period saw the business lose about $110 million over three years. She provided $77 million in secured loans, and she originally paid $80 million for the business in 2009 before buying it back for $59 million from the administrators.
DSG is another company owned by Jan Cameron. DSG ran the Retail Adventures business on behalf of the administrators and, under the proposed arrangement, will own and operate the restructured Retail Adventures going forward.
Yes. The administrators say their investigations — particularly into possible preference payments — are critical to determining whether legal action in liquidation is worth pursuing. Successful recoveries could improve returns to creditors; conversely, if recoveries aren’t possible, unsecured creditors may receive little or nothing.
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