Dick Smith collapse: Four things we learnt after the first meeting of creditors
Friday, January 15, 2016/
The first meeting of Dick Smith creditors took place in Sydney yesterday, 10 days after the electronics retail chain collapsed into voluntary administration.
As other retailers continue to come forward to assist Dick Smith customers left holding invalid gift cards, more than 100 interested parties representing more than 350 unsecured creditors, as well as trade creditors, landlords and employees, attended the meeting.
Dick Smith owes more than $400 million to creditors, approximately $250 million of which is owned to unsecured creditors.
Here are four things we now know about the collapse of Dick Smith following yesterday’s meeting.
1. Some employees have already lost their jobs
While Dick Smith continues to trade, receivers Ferrier Hodgson have made their first job cuts at the electronics chain.
The Sydney Morning Herald reports 12 employees in the Dick Smith head office lost their jobs yesterday.
The support staff worked across a number of departments and the receivers said in a letter to staff the decision to make the positions redundant “is not in any way a reflection of the employees’ performance or work ethic”.
“The decision regarding which employees to make redundant was based on the predicted ongoing needs of the Dick Smith Group in the restructured environment.”
At the creditors’ meeting, it was revealed Dick Smith’s employees are owed approximately $15 million in wages and leave entitlements.
2. McGrathNicol was appointed as advisers to Dick Smith before Christmas
McGrathNicol were officially appointed as voluntary administrators of Dick Smith Holdings on January 4, however, it has now come to light the firm was appointed as advisers to the business’s management team two days before Christmas on December 23.
However, administrator and McGrathNicol partner Joseph Hayes reportedly declined to comment as to whether the market should have been told about the appointment.
“In the circumstance it’s usual for a company to appoint an adviser when they’re facing cash constraints – that was only a short-term appointment,” Hayes said, according the news.com.au.
3. The voluntary administration is likely to continue for another six months
Dick Smith creditors, shareholders and customers will likely be in for a long wait to learn the fate of the business, with the administrators informing creditors at the meeting on Thursday they intend to apply for extra time to investigate the collapse.
According to news.com.au, Hayes told creditors it would be impossible for the administrators to complete their investigation by the current deadline of February 9 given the size and scope of the Dick Smith business.
He said an extension will also help provide “stability” for the business as the sale process continues.
4. The administrators preferred option to sell the entire business to a single buyer
Receivers Ferrier Hodgson said earlier this week it received more than 40 expressions of interest in the Dick Smith business prior to commencing a formal advertising campaign.
According to Fairfax, the number of expressions of interest is now at 45 and McGrathNicol said on Thursday selling the complete Dick Smith network to a single buyer would be the preferred option.
“We are supporting the receivers as best we can to make sure they have a stable environment within which to make those offers,” Hayes said.
“It’s an iconic brand in which there will be a lot of interest. A sale of the entire network to a well capitalized buyer who wants to properly leverage that brand… would release the most value.”