The owner of the collapsed Pulse Pharmacy chain is offering a bankruptcy deal that would see him pay $500,000 to erase more than $72 million of debt just eight months after the chain collapsed.
It’s a deal that creditors won’t be happy with. Controlling trustee Jim Downey of Downey & Co said in a correspondence they’ll only be paid a “miniscule” amount of four cents to the dollar.
Rohan Aujard’s fall into financial despair comes just eight months after Pulse Pharmacy was placed in receivership last December. PPB were appointed over 12 stores, and only weeks after a property company behind the chain was placed in administration as well.
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Aujard owes $72 million, including $45 million to NAB, but only controls assets worth $180,000 including $475 in cash, $30,000 in superannuation and $150,000 in the value of the business.
The application for bankruptcy reveals Pulse was suffering financially as early as 2010.
Although the business was 70 locations strong and turned over approximately $300 million a year, it experienced “a significant cashflow problem” in 2010 when the credit terms of main suppliers were reduced from 120 days to 90.
Several store sales followed, with independent owners “becoming nervous”.
The company finally hit a wall in December 2011 when NAB called in receivers.
Aujard owes $72 million, $45 million of which is owed to NAB and the rest based on personal debts “incurred in the running of his business or by way of personal guarantee given by him”.
However, Aujard told SmartCompany today that $72 million figure is likely to drop by the time receivers PPB are through with their sale process.
He only has to his name $475 in cash, $30,000 in superannuation, $1,000 worth of personal effects and a $150,000 interest in the remains of a pharmacy business which isn’t under NAB’s control. All up, his assets total $181,475.
The rest of the money for the $500,000 payment will come from one or more third parties.
Aujard is also listed as a “casual” employee of his pharmacy, with an anticipated income of $80,000 in the year to June 2013. He is required to make child support payments of $2,000 every month.
Under a bankruptcy agreement, Downey says the return for creditors would be nothing. But under a personal insolvency agreement, the return would by 0.44%.
“The proposed Personal Insolvency Agreement will provide a return to creditors in a timely manner which would not otherwise be available to creditors,” Downey says.
“However, the anticipated dividend is miniscule and creditors may deem it insufficient to offer its support.”
But in the letter to creditors Downey says they should give “serious consideration” to the proposal, as it “offers the best chance of a return”.