Discount chain's rescue remains work in progress
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.
Frequently Asked Questions about this Article…
Administrators from Deloitte say the supposedly viable core of Retail Adventures still requires further restructuring. Jan Cameron is running the business under licence while a sales process is underway. Administrators have reported further store closures and job losses, are investigating past transactions, and continue to negotiate with suppliers and potential buyers.
As of the week before Christmas the number of redundancies rose from an initial estimate of 630 to 763 actual job losses. Ms Cameron’s operating company (RSG) initially ran 238 stores under licence employing about 5,000 staff, and administrators reported a further 14 stores are under review and may close.
Deloitte administrators, led by Vaughan Strawbridge, disclosed they are probing an unspecified number of transactions executed before their appointment. Their review may cover potential breaches such as directors’ duties, preferential payments or trading while insolvent, though details have not yet been released.
It’s unclear. Administrators say current sales talks are ongoing, but they have not confirmed whether a sale will generate enough to repay Ms Cameron’s secured loans, employee entitlements, or the more than $100 million owed to suppliers. On the positive side, most key suppliers are reported to be back on board and commitments for new stock exceed $58 million.
Jan Cameron has provided additional funding to keep the business operating. The administrators said she contributed a further $32.8 million, and previously she had provided funding that became secured loans totalling $80 million. According to the report, about $7 million remains available to cover future commitments.
Administrators reported that disclaimed leases—mainly for parts of the business no longer operating—are expected to generate roughly $14.4 million in annualised savings.
Ms Cameron is one of two potential buyers for the entire Retail Adventures business. Another 10 potential buyers have expressed interest in acquiring various parts of the business, and the administrators are running a sales process to assess offers.
Investors should monitor administrators’ updates on the sales process, findings from the investigations into pre-appointment transactions, announcements about further store closures or cost savings, supplier commitments and stock funding, and any information about creditor recoveries or the outcome of potential bids for the business.
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