January news digest
01 February 2017
The following are summaries of media stories related to business turnaround and insolvency in Australia during January 2017.
BLK went broke partly thanks to unprofitable sponsorship of sports teams: administrators PPB
3 January 2017
The Courier Mail reports that “football jersey maker BLK financially crumbled partly thanks to an overinvestment in unprofitable sponsorships of sports teams, according to administrators of the Gold Coast-based outfit. BLK also accumulated too much inventory, administrators Martin Ford and Michael Owen of PPB Advisory determined in initial findings. Inventory from 2014 and 2015 seasons were discovered when receivers were appointed in November. The administrators’ findings were on top of reasons given by directors for the failure of BLK, whose companies were World Rugby Specialists (WRS) and World Rugby Specialists Group.”
Insolvent Great Southern Shipping creditor meeting set
3 January 2017
Splash 24/7 reports that “creditors of Australian line Great Southern Shipping Australia (GSS), which filed for insolvency on December 23, have been called to meet in Sydney on January 9 to receive an update on the company’s liquidation. Great Southern Shipping set up a joint venture with Chinas Rizhao Port Group in May to form GSS Australia with a view to buying five container ships to focus on Australia’s coastal trades and voyages to Rizhao in northern China’s Shandong province.”
Experts are predicting Queensland will see a rise in property development firms hitting trouble
9 January 2017
The Courier Mail reports: “insolvency experts predict Queensland will see a rise in property development firms hitting trouble in 2017. The increase could be due to a construction oversupply and problems with customers deciding against going through with purchases. Taxis and retailers could also face tough times, experts said. It comes after Queensland experienced a middling year in terms of businesses going bust. Data from the Australian Securities and Investments Commission states Queensland had 1973 insolvencies in the 12 months to September last year. That’s slightly up on the previous year but not as dour as the 2308 collapses that struck in the 12 months to September 2012.
Australian Taxation Office move threatens small business bankruptcies
9 January 2017
The Australian reports that “over the holiday break when relatively few were watching, Prime Minister Malcolm Turnbull and Treasurer Scott Morrison announced a plan that would bankrupt or put out of business tens of thousands of small enterprises around Australia … The government plans to allow the Australian Taxation Office (ATO) to disclose to credit reporting bureaus the names of those who owe the money unless they have ‘effectively engaged with the ATO to manage these debts’. The reality is that the moment those names are published all bank and supplier credit will be withdrawn — that’s what happens in the small business community. And as soon as bank and supplier credit is withdrawn almost all the businesses will fold.”
11 January 2017
Business News WA reports that “rental, hiring and real estate services were among the industries that fared worst as external administrations jumped 14 per cent in Western Australia for the September quarter, as insolvency experts warn that an economic rebound has not yet clearly emerged. Around 260 WA businesses entered administration in that three-month period, up from 228 in the June quarter, according to the latest numbers from the Australian Securities and Investments Commission.
11 January 2017
The Shout (Hotel, Bar, Club & Liquor News) reports that “receivers Ferrier Hodgson have announced that the divestment of Keystone Group assets is now complete. The hospitality group was placed in receivership in June 2016 after it became clear that the business would not be able to service its $80 million worth of debt. Ferrier Hodgson have run the group’s venues while looking for new ownership for the various assets that ranged from pubs and bars, to steakhouse restaurant and the chain of Jamie’s Italian restaurants.”
WA company collapses down, but warning on retail
12 January 2017
The West Australian reports that “WA corporate insolvencies in November last year fell to the lowest level since January with only 73 companies hitting the wall. FTI Consulting said ASIC data showed a falling rate of insolvency across Australia with the national figure for November of 636 companies folding lower than the 677 firms that failed the previous month and the 872 businesses that collapsed a year earlier. By the end of November, 8001 companies had entered external administration nationally, 1536 fewer than the first 11 months of 2015 and the lowest for the period since 2007.”
The road ahead for 2017 – restructuring & insolvency in Australia
12 January 2017
The National Law Review (UK) reports: “It is anticipated that, by the middle of the year, Australia will see the most significant reform to the corporate and personal insolvency environment in two decades. The reforms, which appear likely to be supported by all sides of government, are designed to promote business preservation and allow greater flexibility in order to ‘turnaround’ distressed companies.”
Stock to watch as personal debt climbs
16 January 2017
The Bull reports that “personal indebtedness keeps rising despite a sluggish economy, record-low wages growth and already strained finances. Credit Corp, Collection Group, Pioneer Credit, Thorn Group and Cash Converters benefit, to varying degrees, when consumers need help with their finances, be it through short-term lending, equipment rentals or the ability to pawn goods for cash. FSA Group, Australia’s largest provider of consumer-debt solutions, is another beneficiary. A lender to individuals through non-conforming home and personal loans, FSA benefits from demand for household finance solutions and is a stock worth watching.”
Maritimo Offshore undertakes company restructure
16 January 2017
Marine Business reports that “the manufacturing arm of Queensland boat builder Maritimo went into – and out of – voluntary administration towards the end of last year, a move which the company says was part of an internal ‘restructure’ in preparation for a future stock market listing.”
Pie Face receiver says business is close to profitability and sale
17 January 2017
The Sydney Morning Herald reports that “fast-food chain Pie Face is heading towards profitability for the first time in a long time, as its receiver flags the business will be sold shortly. But the one-time, high-flying, hot-pie business has left behind a trail of destruction. Secured debt is $4 million and unsecured debt is estimated to be under $5 million with employees alone owed more than $1 million. And the listed Retail Food Group, which owns Di Bella Coffee, has made an application to wind up Pie Face Australia in the Queensland Supreme Court over an unpaid debt. RFG declined to comment.”
Brisbane Baroque festival placed into voluntary liquidation
17 January 2017
The Courier Mail reports that “the State Government has stepped in to help pay creditors owed money by a high-brow Brisbane festival that has gone into voluntary liquidation. Tourism and Events Queensland’s Group Executive - Corporate Affairs Megan Saunders said TEQ would stand by its offer to help pay creditors owed money by the Brisbane Baroque festival. “It is now a matter for the liquidators who we will work with as required,” Ms Saunders said. “Our offer to alleviate the hardship suffered by creditors of Brisbane Baroque by contributing a voluntary payment equal to the post-event payment to those creditors still stands. TEQ does not owe any sum to Brisbane Baroque.””
Goodman Fielder announces more than 200 redundancies
17 January 2017
The Australian reports that “food manufacturer Goodman Fielder has announced more than 200 redundancies as its Asian-based owners reshape the baking business two years after taking control of the operation. The current owners, Singapore’s Wilmar International and Hong Kong’s First Pacific, delisted the household Australian name from the ASX in early 2015 after winning the support of investors for a $1.3 billion takeover. The owner of brands such as Helga’s and WonderWhite bread has since been operating largely out of the public limelight, aside from the closure of its Tamworth bakery at the expense of 30 jobs. A restructure plan for the bakery arm gathered momentum today with news Goodman Fielder was set to consolidate its local operations.”
European arm of top Asia-Pacific trademark player King & Wood Mallesons enters administration
17 January 2017
World Trademark Review reports that the “London office of King & Wood Mallesons (KWM) – a general practice firm with top-rated trademark credentials, previously touted as ‘the first global law firm headquartered in Asia’ – entered administration this week. In the aftermath of what is reported to be the largest ever law firm collapse in the UK, KWM has established a new business to maintain a strategic presence in Europe. World Trademark Review reported last month on the litany of financial and organisational troubles at KWM’s European Union and Middle East (EUME) arm, which the firm had assimilated through its merger with SJ Berwin in 2013. This followed a hook-up the previous year between King & Wood – widely renowned as one of China’s leading IP law firms – and Australian outfit Mallesons Stephen Jaques, giving rise to the KWM brand and the first Asian global law firm, with its headquarters in Hong Kong.”
Diploma unable to start new jobs
17 January 2017
Business News WA reports that “the Building Commissions Building Services Board has imposed conditions on two Diploma Group subsidiaries, limiting their ability to carry out work, after the parent company fell into the hands of administrators just before Christmas. The BSB has targeted Diploma subsidiaries DGX Construction and Diploma Construction by imposing conditions that prevent the two companies from entering into building work contracts where contractor registrations are required. Ferrier Hodgson have been appointed as receivers and managers of the business.“
'Comfortable' Culleton continues his electoral office sit-in
17 January 2017
The Australian reports that “disqualified senator Rod Culleton says he feels “very comfortable” in the Perth electoral office that he refuses to vacate and has angrily rejected reports he and his staff are not being paid by the federal government. Mr Culleton insisted that he remained a senator for Western Australia and said it was up to the High Court, rather than the Senate, to decide on whether he could remain in parliament. Mr Culleton denied he was a bankrupt, saying the Federal Court had allowed for a stay on his estate being formally seized until Friday. However, he is registered as an undischarged bankrupt on the National Personal Insolvency Index.”
Guvera music streaming service escapes insolvency bid
18 January 2017
The Sydney Morning Herald reports that the “troubled Australian music streaming service Guvera has escaped an attempt to have its business sent to the liquidators. An investor had been seeking an order to wind up the Gold Coast company, claiming a debt of almost $1.8 million. Guvera was shaping as Australia's biggest challenger to streaming giants Spotify and Apple. Kwong Properties took the business, which was blocked from listing on the Australian Securities Exchange in June, to the Supreme Court of Queensland in December to recover the money. The application was heard in Brisbane on Wednesday morning, where it was dismissed with the consent of both sides. Lawyers for both companies refused to comment outside court.”
Personal debt agreements replace bankruptcies in WA
18 January 2017
The Australian reports that “West Australians have turned to personal debt agreements rather than full-fledged bankruptcy as they deal with bills they can’t pay following the end of the state’s mining boom. Government statistics released yesterday show total personal insolvencies across Australia rose for the seventh year in a row, increasing 0.9 per cent, to 7055, in the December quarter compared to the same time last year. Western Australia drove the increase, with personal insolvencies surging 26.2 per cent to 824 people, more than offsetting falling numbers in the eastern states, South Australia and the Northern Territory.”
Clive Mensink ordered back to Australia for Queensland Nickel questioning
19 January 2017
The Brisbane Times reports that “Clive Palmer's absent nephew risks arrest if he does not return to Australia next month to give evidence to a court examining the collapse of Queensland Nickel. Clive Mensink has been summoned to return from Europe to face questioning but reportedly has no plans to cut short his European holiday. Special purpose liquidator PPB Advisory, assigned to recoup millions of dollars in taxpayer money paid out to sacked workers, questioned Mr Palmer on countless communications between himself and his nephew.”
‘Debt vulture’ agreements at all-time high
20 January 2017
The New Daily reports that “debt management firms have been accused of pushing a form of insolvency aimed at the poor to an all-time high. New data released by a federal agency on Tuesday revealed that the number of Part IX debt agreements has risen for the 12th year in a row. Agreements under Part IX of the Bankruptcy Act are widely marketed as “debt solutions” to Australians with mounting credit card or mortgage debt. Only low-wealth individuals can use them. The number of these agreements increased in the 2015-16 financial year to a total of 12,150 – up 11.3 per cent on the previous year, the Australian Financial Security Authority reported this week.”
20 January 2017
Business Insider Australia reports that “digital telecommunications company Avaya filed for chapter 11 bankruptcy protection in the United States overnight, but the Australian arm insists it is business as usual despite the turmoil. Reuters reported Friday that Avaya filed for chapter 11, which is similar to voluntary administration in Australia, to restructure and reduce its massive $US6.3 billion debt, following a decade of losses. Avaya has a substantial presence in Australia with offices in five capitals, but it has had troubles of its own, churning through four MDs in the past two years. “Having transformed over the past 24 months, Avaya Australia & New Zealand closed fiscal 2016 with its strongest quarter in 12 quarters,” an Avaya Australia spokesperson told Business Insider.”
More than 500 job losses as more Pumpkin Patch stores to close
20 January 2017
According to the Manwatu Standard (NZ) “a further 68 Pumpkin Patch stores are to close by the end of January, resulting in up to 560 job losses. The company was placed in voluntary administration and receivership last year after struggling with a lack of money and too much debt. According to a receivers' report by KordaMentha, the company owed its bank almost $60 million and its unsecured creditors another $13.2m. Pumpkin Patch employed almost 600 people in New Zealand and 1000 in Australia.”
Sports apparel firm BLK sold to East Timor, Fiji investors
21 January 2017
The Australian reports that that “BLK, the company behind the match-day jerseys once worn by 2016 AFL premiers the Western Bulldogs and the NRL’s Gold Coast Titans, has been sold to an East Timor-based company and Fiji-based investors for an undisclosed sum. The sports apparel group went into administration in November last year following what administrators PPB Advisory called “overinvestment on staff, stock and premises” and a natural disaster affecting the company’s Fijian manufacturing base. The company’s new owners are a consortium led by Timor-based oil and energy company Esperanca Timor Oan, which announced the acquisition of BLK and associated sub-brands from World Rugby Specialists yesterday but did not reveal the price paid. The new company will be rebranded as BLK International.”
21 January 2017
Hellenic Shipping News reports: “Readers will recall that on 23 September 2016 we posted an article about recognition under the UNCITRAL Model Law on Cross-Border Insolvency (Model Law) of the Korean rehabilitation proceedings for Hanjin Shipping. After granting interim recognition of the rehabilitation proceedings in September 2016, the Federal Court granted final recognition orders on 11 November 2016. The final orders obtained and the court’s reasons for granting the orders are significant as they answer the question of how the scope of the automatic stay is determined upon recognition of a foreign main proceeding of a corporate debtor under the Model Law.”
'Why couldn't they be honest?' SmartCity students locked out
24 January 2017
Bundaberg News Mail reports that “it was the first day back for students at SmartCity Vocational College on Monday. Or at least, it was supposed to be. Wendy Walters arrived at the campus on Woongarra St to continue her counselling studies, but she and her classmates were met with a surprise. The doors were locked, with a notice declaring the office would reopen that day, but no sign of life. The company behind SmartCity, a national training organisation, went into voluntary administration in December, leaving more than 300 staff across Australia jobless and students in limbo. Now Ms Walters and her classmates want answers.”
BuiltonCorp: WA homeowners hit as builder placed into voluntary administration
24 January 2017
ABC News Online reports that “work has stopped on about 130 residential home building sites as Perth builder BuiltonCorp is placed into voluntary administration. Administrators Con Cordis have announced the company owes about $16 million to 350 unsecured creditors, mostly subcontractors. They also said 38 jobs at the company had been axed, and a priority would be to return about $500,000 in unpaid entitlements to those workers. The administrators were also appointed to Builton Group, Builton Property Holdings and Aspireon Homes.”
RSL boss Don Rowe challenged over credit card expenditure by staff
24 January 2017
The Daily Telegraph reports that “more than three years before Don Rowe quit as president of NSW RSL a staffer raised concerns about massive spending on his corporate credit card, only to be told “well, a man has to live”. Police are investigating Mr Rowe’s credit card expenses, with a damning audit claiming he ran up a $475,000 bill, including $213,000 in cash withdrawals, between 2009 and 2014. It is also alleged the Vietnam War veteran racked up a phone bill of $38,373 after giving mobiles to five family members over the same five-year period. An audit by KordaMentha reveals financial officer Ivan Brisot raised concerns about Mr Rowe’s spending three years before his resignation.”
25 January 2017
SmartCompany reports that “the security of payments for subcontractors in the building and construction sector are again in the spotlight after Western Australian builder BuiltonCorp collapsed into voluntary administration on Monday. The company’s administrators are advising clients with homes under construction by the company that it’s likely they will have to find new builders to complete projects their projects. Dino Travaglini and Jeremy Nipps of Cor Cordis have been appointed as administrators of BuiltonCorp Pty Ltd, as well as Builton Group Pty Ltd, Builton Property Holdings Pty Ltd and Aspireon Homes Pty Limited, with construction stopped on about 130 incomplete sites as the company ceased trading.”
Nathan Tinkler borrows thousands from father to fund overseas trip
25 January 2017
The Courier Mail reports that “bankrupt recluse Nathan Tinkler is borrowing thousands of dollars from his elderly dad Les Tinkler to fund a ten-week jaunt to Hawaii and New York with his new family, a court has heard. The former mining heavyweight, turned jobseeker, hopes to be in Manhattan for his 41st birthday on Wednesday. He was in the Federal Court in Brisbane today with his Queens Counsel in a bid to board a flight to New York on Sunday. Tinkler, who now lives in Coffs Harbour with secretary-turned-fiancée Jodie Van Gilst and their two babies, needs the court to green-light the trip because his passport has been seized by his bankruptcy trustee, and he is banned from travel without the consent of his bankruptcy trustee, John Melluish of Ferrier Hodgson.”
Administrators fail in Payless buyer hunt
25 January 2017
NineMSN reports that “Payless Shoes is pressing ahead with the closure of all 132 stores after administrators were unable to find a buyer for any part of the retail chain. Administrator Ferrier Hodgson says about 750 staff will be made redundant and that all employee entitlements are expected to be paid in full, with the first 13 stores shutting doors for the last time this coming Saturday.”
25 January 2017
ABC News Online reports that “Australia has maintained its position in a key corruption ranking, ending a four-year slide down Transparency International's global corruption ladder, but experts warn the reprieve may be short-lived if major reforms are not implemented. For the second year running, Australia placed 13th in the rankings. In 2012 Australia was ranked 8th. Former AFP fraud investigator Peter Morris, now a partner at PPB Advisory, agreed that a federal anti-corruption body would improve Australia's international standing when it came to tackling corruption. "I think that would go towards assisting the perceived efforts dealing with corruption in the public sector as well, so I think that would be a positive step also," Mr Morris said.”
BlueScope surges on profit upgrade
25 January 2017
The Australian reports that “resurgent BlueScope Steel will make further inroads into its debt and could lift dividends beyond expectations after it revealed another earnings upgrade. And the rising earnings at BlueScope amid stronger prices for steel and iron ore is also boosting expectations failed rival Arrium will secure better than expected prices for its suite of remaining assets, including its Whyalla steel mill and South Australian iron ore operations. Analysts are expecting BlueScope to pay out about 12c a share in dividends this financial year, according to Bloomberg data, up from 6c in 2016. The strong performance of BlueScope will boost the hopes of Arrium administrator KordaMentha as is nears the business end of sales negotiations over the sell-off of the company’s remaining assets.”
26 January 2017
ABC News Online reports on “a gold mine north of Katherine which has started deliberately discharging contaminated water into a river due to the heavy rainfall in the area. Mount Todd mine, 45 kilometres north of the town, has not been active since 2000 after its original owner went into voluntary administration. It has remained in care and maintenance since, with a tailings dam on the site containing copper, aluminium and cadmium.”
Minister moves to reopen Ellendale diamond mine and avoid environmental costs
27 January 2017
ABC News Online reports that “yellow diamonds could be mined in the Kimberley again and taxpayers could avoid up to $40 million of future environmental liabilities if Mines Minister Sean L'Estrange can attract a new operator. The plan requires some legal manoeuvring by the Minister after the Ellendale mine's liquidators, Jirsch Sutherland, were able to transfer the mining lease and environmental liabilities — reportedly as much as $40 million — back to the State Government in October 2015.”
Hedge funds find you snooze, you lose on Atlas Iron
27 January 2017
The Australian reports that “several global hedge funds are growing frustrated after the window to buy Atlas Iron debt has effectively closed after a surging iron ore price delivered early buyers a strong tide of benefits. The West Australia-based miner went scrambling to lenders more than a year ago in a bid to survive and borrowed $180 million, which essentially kept it afloat. The company has undergone two recapitalisations with its lenders, who now include Western Asset Management, Marathon, global miner and commodities trader Glencore and the Commonwealth Bank. Debt in the business was for sale around July at about 40c in the dollar, sources said. But in mid-September, when hedge funds were eager to take the loans off their hands, the iron ore price was trading in the mid $US50 a tonne range.”
Australian Construction Firms Owed $15.4 billion in Unpaid Debt
31 January 2017
Construction News reports that “small and medium sized construction businesses throughout Australia are ‘drowning in a sea of unpaid customer bills’ according to the latest report which found that small and medium businesses throughout the sector are owed a combined total of $15.4 million in unpaid debts. Releasing its latest report, The Invoice Market said that on average, small to medium sized businesses are perpetually owed $44,812 each, with debtor excuses for non-payment ranging from ‘lost in the system’ to ‘being reviewed internally’ to being ‘in dispute’ or being ‘processed off-shore’.”
Future Fund tops 2016 target as Costello warns of elevated risks
31 January 2017
The Australian reports that “Australia’s sovereign wealth fund, the Future Fund, has overcome sharp financial volatility and market uncertainty to beat its target over the 2016 calendar year. The Peter Costello-chaired fund booked a return of 7.8 per cent over the last 12 months, eclipsing its target return mandate by nearly 2 percentage points. Mr Costello had warned as recently as December that the fund was facing a “formidable” challenge to meet its mandated 4.5 to 5.5 per cent return above inflation as globally low interest rates make easy returns scarce. “We maintain our long-held view that we see a challenging investment environment ahead with elevated risks and lower prospective returns than in previous years,” Mr Costello said in a release announcing the fund’s performance today.”