A bid to have Australian insolvency practitioners Ferrier Hodgson replaced as the administrators of Whitcoulls and Borders gained little traction at the first New Zealand creditors’ meeting this week.
In a show of hands no creditors except the New Zealand Customs Service, which proposed the plan, voted in favour of it.
The booksellers’ parent company REDgroup Retail Pty was placed in voluntary administration by its directors on February 17, and Ferrier Hodgson appointed on both sides of the Tasman to handle the process.
Preferential creditor Customs wanted Ferrier Hodgson dropped and local firm Waterstone Insolvency appointed as the administrators of the Kiwi operations.
Waterstone principal Damien Grant told the meeting that almost half of the A$44 million owed to unsecured creditors was due to New Zealand-based organisations and individuals. “We have a disproportionate level of the unsecured debt in New Zealand.”
Private equity firm Pacific Equity Partners which owns REDgroup had given the company secured loans of A$113 million, accounting for most of the company’s A$170 million in liabilities.
That meant PEP, which put the company into voluntary administration, was entitled to get paid ahead of any of the preferential or unsecured creditors.
“We would be negotiating very hard with PEP in terms of doing a deal in respect of New Zealand,” Grant said.
But getting their head around the voluntary administration regime itself appeared to be enough for bewildered creditors at the Ellerslie Event Centre on Tuesday.
The gathering was surprisingly subdued, with virtually no comment from the floor.
Voluntary administration (VA) is not new in Australia but was only introduced into New Zealand in 2007.
The aim of it is to rehabilitate companies rather than put them into receivership or liquidation, and to offer a more orderly wind-up of firms that are not viable. One of the intentions is to provide higher returns to creditors.
However the regime has produced mixed results in this country so far.
REDgroup is the first transtasman VA and the largest to date in New Zealand, and its progress is being watched closely by the insolvency fraternity. The Australian and New Zealand rules are similar but not identical. For instance, In Australia preferential and unsecured creditors can be treat the same; in New Zealand preferential creditors must be accorded preferential status, meaning they are usually paid before unsecured creditors.
By Maria Slade