Litigation in the mix for retail discount chain
A team of administrators from Deloitte led by Vaughan Strawbridge is investigating an unspecified number of transactions executed before its appointment, as well as looking into whether the company traded while insolvent.
The administrators, who are assessing interest from potential purchasers of the remaining Retail Adventures business, would not comment on their investigations.
"It is not unusual for an administrator to have discussions with a litigation funder," a Deloitte spokesman, Simon Rushton, said.
"For now, there are no ongoing discussions and no identified actions being considered by any parties."
Retail Adventures has made losses totalling $114 million since Ms Cameron acquired the business out of receivership in March 2009.
The company's directors had relied on Ms Cameron's financial support to prepare the company's accounts on a going concern basis.
By the time administrators were appointed, the company had net liabilities totalling about $118 million.
The sales process will help determine whether it is worth pursuing a deed of company arrangement on behalf of creditors, or if they are better off winding up the company.
The administrators' investigations would be critical in determining whether there is legal action worth pursuing - in liquidation - on behalf of the 1700 creditors owed $270 million.
Ms Cameron is one of two interested parties looking to acquire the entire business.
If successful, Ms Cameron is expected to use an $80 million secured debt to help reacquire the business she paid $85 million for in 2009.
A spokesman for Ms Cameron declined to comment.
With secured creditors owed $105 million, a sales price would have to exceed this amount before unsecured creditors - owed $165 million - would receive a cent.
A recommendation from the administrators is expected before the second meeting of creditors, which is due to be held by February 26.
Frequently Asked Questions about this Article…
Retail Adventures is in administration and the Deloitte team led by Vaughan Strawbridge is investigating the business. Administrators have confirmed they’ve been in talks with litigation funder IMF about potential legal action if the failed discount chain goes into liquidation next month. They are also assessing interest from potential purchasers as part of a sales process.
Jan Cameron, the founder of Kathmandu, bought Retail Adventures in March 2009 for $85 million. The company has recorded $114 million of losses since that acquisition. Ms Cameron is one of two parties interested in buying the entire business back and is expected to consider using an $80 million secured debt facility if successful.
The administrators are investigating an unspecified number of transactions carried out before their appointment and are looking into whether the company traded while insolvent. Their inquiries will help determine the outcome of the sales process and whether any legal action is worth pursuing for creditors.
Administrators have been in discussions with IMF about possible legal action if Retail Adventures goes into liquidation. Deloitte said it’s not unusual to speak with a litigation funder, but at the moment there are no ongoing discussions and no specific actions have been identified. Any funded legal action would likely be considered on behalf of creditors if liquidation proceeds.
Since the 2009 acquisition, Retail Adventures has made losses totalling $114 million. By the time administrators were appointed the company had net liabilities of about $118 million. In total there are about 1,700 creditors owed approximately $270 million.
Secured creditors are owed about $105 million and must be paid in full from sale proceeds before unsecured creditors receive anything. Unsecured creditors are owed around $165 million. A sale price would need to exceed the secured creditors’ claim before unsecured creditors would see any return.
A deed of company arrangement (DOCA) is a formal proposal to creditors that can restructure a company’s affairs instead of winding it up. The administrators’ sales process will help determine whether pursuing a DOCA on behalf of creditors is worthwhile or whether creditors are better off having the company wound up.
A recommendation from the administrators is expected before the second meeting of creditors, which is due to be held by February 26. That recommendation will inform whether a DOCA is pursued, the company is sold, or it is wound up.
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