Retail Adventures could end in court
The publicly listed IMF has sent letters to unsecured creditors of Retail Adventures to push for a public examination of the collapsed retailer's books, being the first important step to launch a lawsuit.
"What we have been pushing for and are prepared to fund is a proper public examination by the administrator of questions like the security, the insolvent trading and potential preference payments," said IMF managing director Hugh McLernon.
"This examination should have taken place already and certainly should took place either now or after the company goes into liquidation."
It comes as on Tuesday Retail Adventures administrator Deloitte said it had agreed to sell the failed Retail Adventures business to DSG Holdings, a company associated with Ms Cameron, for $58.9 million.
Ms Cameron was Retail Adventures' sole shareholder and the largest secured creditor of the discount retailer that operated under the Crazy Clark's and Sam's Warehouse brands.
Deloitte restructuring services partner Vaughan Strawbridge said DSG's bid was the highest offer received. Of the about 5000 staff at the company it looks like 4700 jobs will be retained. But the sale could be upturned if creditors vote to send Retail Adventures into liquidation, at which point IMF could pounce.
Deloitte has begun its own investigations into these contentious issues and in a circular to creditors said it was investigating issues around insolvent trading, uncommercial transactions and unfair loans to a company. It will also investigate $77 million in loans made by companies linked to Ms Cameron to Retail Adventures before its collapse, and that security backing up to $50 million of that debt could be challenged by a liquidator.
It is this $77 million in secured debt Ms Cameron is using to pay off the purchase price of Retail Adventures by her DSG Holdings.
Mr McLernon said if Retail Adventures was placed in liquidation, only after a public examination has occurred could he decide if there were grounds for a lawsuit against Ms Cameron and former directors of Retail Adventures. "The material available including the accounts that ASIC have required to be produced by [Retail Adventures] indicate that there is a serious need for a proper and full public examination."
A spokesman for Ms Cameron would not comment on these issues.
Frequently Asked Questions about this Article…
IMF, a publicly listed litigation funder, is pushing unsecured creditors to support a public examination of Retail Adventures' collapse and says it is prepared to fund that examination. IMF says the probe is a first step toward possibly bringing a class action on behalf of unsecured creditors against Jan Cameron and former directors if grounds for litigation emerge.
A public examination is a formal inquiry by the company's administrator into issues such as insolvent trading, uncommercial transactions and problematic director-related deals. For everyday investors and unsecured creditors, it can reveal whether there are grounds for recovery actions and help determine whether a class action or liquidator challenges are warranted.
IMF has specifically urged investigation into possible insolvent trading, uncommercial transactions, potential preference payments and the security and loans connected with the company — matters that could affect creditor recoveries if proven.
Deloitte, the administrator, agreed to sell the business to DSG Holdings — a company associated with Jan Cameron — for $58.9 million, and says DSG’s bid was the highest. Creditors could vote to place Retail Adventures into liquidation, which might upend the sale and enable IMF or a liquidator to take further legal action if the public examination finds cause.
Deloitte has started investigating allegations around insolvent trading, uncommercial transactions and unfair loans to a company. It is also examining about $77 million in loans made by companies linked to Jan Cameron to Retail Adventures and whether up to $50 million of security backing that debt could be challenged by a liquidator.
The article says about $77 million in loans were made to Retail Adventures by companies linked to Jan Cameron. Deloitte will investigate those loans and notes that security backing up to $50 million of that debt could potentially be challenged by a liquidator.
Deloitte said the DSG bid was the highest and that of roughly 5,000 staff, about 4,700 jobs look likely to be retained under the sale. However, that outcome could change if creditors vote to send Retail Adventures into liquidation.
Unsecured creditors may receive communications from IMF urging support for a public examination and will be kept informed by Deloitte’s circular about ongoing investigations. Creditors will ultimately have a vote that could send the company into liquidation — a move that could allow IMF or a liquidator to pursue recovery actions depending on the findings of any public examination.
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