Wednesday, March 02, 2011

Borders millions in the red: administrator

Sydney Morning Herald, 1 March

Staff and creditors of the collapsed REDgroup will know within days which of the company’s stores will close.

Steve Sherman of Ferrier Hodgson told creditors the company which owned Borders, Angus & Robertson, Whitcoulls and Supa News, had total cash of $6.4 million and secured debt of at least $118 million when it went into administration.
He told creditors that REDgroup's owner, Pacific Equity Partners, was considering shutting down some of the stores before the business went into administration.
Staff and creditors should know in the next 72 hours which stores would be closed.

The failed Borders business in Australia alone collapsed with only $1 million cash in the bank and group entitlements owed to staff of $7.8 million, the administrator told creditors this morning.

Mr Sherman said REDgroup was focusing on a restructure of the group and a Deeds of Company Arrangement - an arrangement to resolve the company's debt problems without liquidating it.
He said that, when REDgroup collapsed late last month, the company had a total of $6.4 million in cash and stock on hand of $119.9 million.
It had employee entitlements of $7.8 million and unsecured creditors owed $44 million.

He said the business was cash-flow positive but staff needed to be realistic about the future of the store network.
Mr Sherman said $15 million worth of unused gift vouchers for the book stores were in circulation at the time of the collapse.
He said there were stores within the business that were hurt by online sales and changing market dynamics.

Mr Sherman said the administrators would need further time to go through the failed company's finances and commitments.

Mr Sherman said he would review changes to REDgroup's debt obligations in December organised by Pacific Equity Partners. He said this was an obligation he had as administrator and that he could not comment on the efficacy of the charge taken by the owners at the time.

Documents supplied to creditors this morning showed REDgroup had debt of $118 million to Pacific Equity Partners.

When REDgroup went into administration its online operation had $100,000 cash in the bank.
The group's calendar club business was highly profitable and would continue to trade. There would also be no impact as yet to its partly owned Supa News business, which continues to trade.

Creditors appointed to a committee this morning included publishers, media organisations, Westfield and other suppliers.

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