The Australian arm of Build-a-Bear Workshop has emerged from administration, agreeing to a Deed of Company Arrangement (DOCA) to keep the business afloat.
The company announced its administration in mid-March, blaming increased operating costs and a drop in foot traffic for the business’ decline. At the time, administrators Lowe Lippman were appointed, and the company announced 10 stores across Australia would close.
Build-a-Bear is headquartered in the United States, where it’s listed on the New York Stock Exchange. Its Australian operation is franchised.
At the time of the administration, the company’s chief executive officer Sharon Price John blamed a number “unusual challenges” for the company’s weak Q4 earnings report, including Brexit, GDPR laws, and the collapse of Toys ‘R’ Us.
However, in a statement today, Build-a-Bear Australia’s chief executive Gavin Port said a DOCA had been agreed to by creditors, saving more than 200 jobs and keeping a number of Build-a-Bear stores open.
“We are very pleased to be able to continue offering the Australian guests with the unique experience Build-A-Bear has to offer,” Port said in a statement.
At the time, the company was forced to shut 10 under-performing stores, however, three of those will now re-open as part of the DOCA. Those locations are Westfield Marion (SA), Westfield Miranda (NSW) and Westfield Carousel (WA).
The remaining seven stores will remain closed for the time being.
Millions owed to creditors
A report circulated to creditors last month revealed the company owed $282,000 to the ATO, $346,000 on an American Express corporate credit card, along with $423,000 to ANZ bank in the form of an overdraft account. It also revealed the company had a loss of $31,000 in the six months leading to December 2018.
However, some significant outstanding loans and valuable inventory resulted in the company’s net assets being worth $558,000 at the end of the same period.
In terms of creditors, the company owed $484,000 in employee claims, such as wages, super and leave. A total of $3.9 million is owed to unsecured creditors, which include the ATO, trade suppliers, and gift card holders.
Port himself is also owed $54,000 in the form of a loan, however, the report states he believes that amount may not be payable.
In the report, the administrator’s proposed DOCA includes a number of terms. These include a guarantee the company will pay the employees’ superannuation, the entitlements of all terminated employees (a value of $94,000), and a $276,000 sum, to be paid in 12 monthly instalments.
The deed also proposes a number of parties will not participate for a dividend under the deed, including ANZ Bank, and the franchise’s UK parent company.