Second Meeting of Creditors - McGrathNicol · Second meeting of the COI Week one Immediate shut...

DRAFT

Red Lea ChickensOrlc 92Red Lea FranchiseRed Lea FranchisingRed Lea LogisticsRed Lea Leasing Red Lea HatcheryRed Lea FeedRed Lea Corrugation & FlexoRed Lea Retail Holding(All Administrators Appointed)

(collectively “the Red Lea Group”)

Second Meeting of Creditors9 July 2018

Agenda

2

Introduction

Meeting formalities and overview of voting process

Overview of the Red Lea Group

Overview of the Voluntary Administration

Purpose of meetings

Meetings to be held concurrently

Voluntary Administration of the Red Lea Group

Events leading to the Voluntary Administration

Administrators’ actions to date

Financial position and performance

Reasons for failure

Investigations

Proposed Deed of Company Arrangement

Return to creditors

Administrators’ recommendation for the future of the Red Lea Group

Administrators’ remuneration

Questions

Meeting formalities

3

Open meeting

Administrator Chairperson: IPR 75-50

Introductions

Barry Kogan (Administrator)

Kathy Sozou (Administrator)

Jonathon Henry (McGrathNicol Partner)

Cameron Cheetham (Corrs Chambers Westgarth)

Attendance register

Quorum: IPR 75-105

Time and place convenient: IPR 75-30

Administrators’ report to creditors pursuant to IPR 75-225 (“the Administrators’ Report”)

Proofs of debt and proxies

DIRRI

Voting

Voting

4

Red Lea Group entity Colour of voting slip

Red Lea Chickens Light pink

Orlc 92 Light green

Red Lea Franchise Light blue

Red Lea Franchising Red

Red Lea Logistics Yellow

Red Lea Leasing Bright pink

Red Lea Hatchery Bright green

Red Lea Feed Light purple

Red Lea Corrugation & Flexo Light orange

Red Lea Retail Holding Bright orange

Voting can be done “on the voices” (i.e. by show of hands) or by a poll

Each creditor can only vote in the entity they are a creditor of, you will have received coloured slips at sign-in

Voting

5

Hold up voting slip

Each creditor/proxy holder in the room gets one vote, regardless of how many proxies they hold

When more creditors/ proxy holders vote for it than vote against it

On your voting slip, tick “In favour of” or “Against”, add your name and (for proxy holders) the creditor you represent

Hand voting slip to Administrators’ staff

General proxies: fill in a voting slip for each general proxy you hold

Special proxies: we already have your creditor’s vote (provided in advance or at sign-in)

When more creditors (either in the room or via proxy) vote for it than vote against it ANDWhen those who vote for it are owed a greater amount of money than those who vote against it

On the voices By poll

How to vote

Voting via proxy

How theresolutionis passed

Overview of the Red Lea Group

6

Red Lea Leasing

Red Lea Franchise

Red Lea Franchising

Red Lea Feed

Red Lea Hatchery

Red Lea Logistics

Redlea Group Holding

Red Lea Corrugation

& Flexo

RL Property Holding plus eight

subsidiaries

Red Lea Retail

Holding

Asif family and related interests

Two wholly owned

subsidiaries

Red Lea Chickens

ORLC 92

Subject to appointment ofVoluntary Administrators

7

Appointment Moratorium period Outcome of VA

2 May

First meeting of

COI

Mid-May

PPE auction

12 April

First meeting of creditors

2 July

Report to creditors issued

20 June

Second meeting of

the COI

Week one

Immediate shut down

of operations and sale of livestock

May

Ongoing employee

entitlements review

20 June

Settlement with

franchisees

3 May

Court granted

extension of convening

period

6 July

$15M received into

trust account

Overview of the Voluntary Administration

29 March

VA’s appointed

9 July

Second meeting of creditors

8

Purpose of meetings

The Red Lea Group enter into a Deed of Company Arrangement

The Red Lea Group enter liquidation

The Red Lea Group be returned to the Current Director

Resolution – meetings to be held concurrently

9

“That the meetings of creditors of each of the Red Lea Group entities, being

Red Lea Chickens Pty Ltd

Orlc 92 Pty Ltd

Red Lea Franchise Pty Ltd

Red Lea Franchising Pty Ltd

Red Lea Logistics Pty Ltd

Red Lea Leasing Pty Ltd

Red Lea Hatchery Pty Ltd

Red Lea Feed Pty Ltd

Red Lea Corrugation & Flexo Pty Ltd

Red Lea Retail Holding Pty Ltd

(all Administrators Appointed)

be held concurrently.”

Events leading to the Voluntary Administration

10

Late 2016Asif family took over day to day

mngt

Jan 2016Major

customers enter

insolvency, $4m bad

debt

Jul 2016Acquisition transaction finalised

Early 2016Logistics and retail entities created

Dec 2016Stat

demand served, key suppliers required

COD

Apr 2017Debtor finance facility entered

into

29 Mar 2018VA’s

appointed

Jun 2015Trading loss of $1.7m



Feb 2018YTD

trading loss of $19.1m

Mar 2017Offered business for sale

Apr 2015$30m

Acquisition by the Asif

family

Acquisition Asif family ownership VA appointment

Administrators’ actions to date

11

Statutory obligations

Discontinuing of operations

Investigations & DOCA proposal

CreditorsEmployees

Financial performance – trading companies

12

Statement of financial performance

$’m FY15 FY16 FY17 YTD18

Sales 175.5 177.2 171.9 81.9

COGS (165.2) (166.0) (167.9) (83.0)

Gross profit 10.4 11.2 4.0 (1.1)

Gross margin 5.9% 6.3% 2.3% (1.4%)

Other income 0.5 0.1 1.0 -

Expenses (12.6) (11.5) (25.6) (18.0)

Operating profit (loss) (1.7) (0.2) (20.6) (19.1)

Source: unaudited management accounts

Loss making from FY15 (and likely earlier), with a trading loss of $19.1 million YTD18

Financial performance – trading companies

13

Source: unaudited management accounts

Introduction of RL Logistics and RL Retail significantly increased expenses


$’m FY15 FY16 FY17 YTD18

Sales 175.5 177.2 171.9 81.9

COGS (165.2) (166.0) (167.9) (83.0)

Gross profit 10.4 11.2 4.0 (1.1)

Gross margin 5.9% 6.3% 2.3% (1.4%)

Other income 0.5 0.1 1.0 -

Expenses (12.6) (11.5) (25.6) (18.0)

Operating profit (loss) (1.7) (0.2) (20.6) (19.1)


$’m Jun-15 Jun-16 Jun-17 Feb-18

Current assets 40.9 39.4 37.6 37.0

Non-current loans to related parties 5.9 32.9 38.8 31.3

PPE and other 20.7 6.1 9.4 9.5

Total assets 67.5 78.4 85.8 77.7

Current liabilities (31.1) (36.9) (50.2) (49.2)

Employee entitlements and other (2.2) (0.8) (0.5) (1.2)

Non-current loans from related parties - (0.8) (34.7) (44.7)

Non-current loans from third parties (13.1) (19.0) - (7.7)

Total liabilities (46.5) (57.4) (85.4) (102.9)

Net assets 21.1 20.9 0.4 (25.1)

Financial position – trading companies

14

Source: unaudited management accountsImpact of acquisition transaction

Financial position – trading companies

15

Source: unaudited management accountsIncreased reliance on related party funding


$’m Jun-15 Jun-16 Jun-17 Feb-18

Current assets 40.9 39.4 37.6 37.0

Non-current loans to related parties 5.9 32.9 38.8 31.3

PPE and other 20.7 6.1 9.4 9.5

Total assets 67.5 78.4 85.8 77.7

Current liabilities (31.1) (36.9) (50.2) (49.2)

Employee entitlements and other (2.2) (0.8) (0.5) (1.2)

Non-current loans from related parties - (0.8) (34.7) (44.7)

Non-current loans from third parties (13.1) (19.0) - (7.7)

Total liabilities (46.5) (57.4) (85.4) (102.9)

Net assets 21.1 20.9 0.4 (25.1)

Intercompany loans

16

Source: company books and records

8.5

13.515.3

13.9

16.918.3

25.6

28.9

-

5

10

15

20

25

30

Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Feb-18

$'m

Funds advanced to RL Chickens via Redlea Group Holding

RL Chickens received more funds from Redlea Group Holding than it returned

17

Reasons for failure

The Group was loss making

Inadequate capital structure

Complex industry dominated by a number of key parties

Investigations

18

Claims available in a liquidation – c. $25M

Transfer of assets

Discharge of Directors’ duties

Unreasonable director related

transactions

Insolvent trading

Significant litigation and delay risk

Voidable transactions

Investigations

19

Redlea Group Holding Pty Ltd


ORLC 92 Pty Ltd

Transfer of business operations

Transfer of property and fixed assets

Asif family

100%

100%

100%

Velcich family

21% (intended but never occurred)

Investigations

20

Claims available in a liquidation – c. $25M

Transfer of assets

Discharge of Directors’ duties

Unreasonable director related

transactions

Insolvent trading

Significant litigation and delay risk

Voidable transactions

Proposed Deed of Company Arrangement

21

$16.5M in funding assured

Employees paid in full in three

business days (excluding

superannuation)

Secured Creditors and related

parties do not claim, and claims

against them released

Red Lea Chickens and ORLC 92 required to participate

Pooled assets and claims

Unsecured creditors

estimated to receive 12 to 15

cents in the dollar

DOCA Proposal from Redlea Group Holding - $16.5M

Return to unsecured creditors

22

DOCA

Liquidation

$3M(based on $20M

unsecured creditors)

15 cent dividend

15 cent dividend

$7.5M(based on $50M

unsecured creditors)

$10.5M

$10.5M

$3M(Administrators’ and legal costs)

$11M(Administrators’ and legal costs)

$16.5M

$45M$16M

(35% of recoveries to litigation funder)

Outcome Creditor claims Employee claims Costs Funds required Return to unsecured creditors

DOCA 1c is $200,000

Liquidation 1c is $500,000

Liquidation recoveries need to be three times higher than DOCA fund

Estimated liquidation recoveries are currently c. 25M

23

Outcome by class of creditor

Employees

Unsecured creditors

Secured creditors

Related parties

Paid in full, including super

Return of 12 to 15 cents

Excluded from DOCA

Excluded from DOCA

Subject to FEG

Less than 10 cents, with significant risk and delay

Partial return

Less than 10 cents, with significant risk and delay

DOCA Liquidation

Recommendation

24

The DOCA Proposal provides a more certain, timely and superior return to creditors than a liquidation

Questions

Voting

26

Red Lea Group entity Colour of voting card

Red Lea Chickens Light pink

Orlc 92 Light green

Red Lea Franchise Light blue

Red Lea Franchising Red

Red Lea Logistics Light orange

Red Lea Leasing Bright pink

Red Lea Hatchery Bright green

Red Lea Feed Light purple

Red Lea Corrugation & Flexo Yellow

Red Lea Retail Holding Bright orange

Voting can be done “on the voices” (i.e. by show of hands) or by a poll

Each creditor can only vote in the entity they are a creditor of, refer

Voting

27

Hold up voting slip

Each creditor/proxy holder in the room gets one vote, regardless of how many proxies they hold

When more creditors/ proxy holders vote for it than vote against it

On your voting slip, tick “In favour of” or “Against”, add your name and (for proxy holders) the creditor you represent

Hand voting slip to Administrators’ staff

General proxies: fill in a voting slip for each general proxy you hold

Special proxies: we already have your creditor’s vote (provided in advance or at sign-in)

When more creditors (either in the room or via proxy) vote for it than vote against it ANDWhen those who vote for it are owed a greater amount of money than those who vote against it

On the voices By poll

How to vote

Voting via proxy

How theresolutionis passed

Enter into Deed of Company Arrangement

28


Orlc 92 Pty Ltd

Red Lea Franchise Pty Ltd

Red Lea Franchising Pty Ltd

Red Lea Logistics Pty Ltd

Red Lea Leasing Pty Ltd

Red Lea Hatchery Pty Ltd

Red Lea Feed Pty Ltd

Red Lea Corrugation & Flexo Pty Ltd

Red Lea Retail Holding Pty Ltd

“That _____________________, enter into the proposed Deed of Company Arrangement with Barry Kogan, Kathy Sozou and Jason Preston being appointed as the Joint and Several Deed Administrators.”

Remuneration – 29 March 2018 to 1 June 2018

29

“That the remuneration of the Voluntary Administrators of __________________________ (Voluntary Administrators Appointed), for the period 29 March 2018 to 1 June 2018, calculated at hourly rates as detailed in the circular to creditors dated 5 April 2018, is approved for payment in the sum of $___________, plus GST and disbursements, and the Voluntary Administrators may pay the remuneration immediately or as otherwise determined by the Voluntary Administrators.”

Summary of resolutions

Red Lea Chickens Pty Ltd 1,012,901 (approved by COI on 20 June 2018)

Orlc 92 Pty Ltd 2,218

Red Lea Franchise Pty Ltd 48,016

Red Lea Franchising Pty Ltd 12,086

Red Lea Logistics Pty Ltd 23,659

Red Lea Leasing Pty Ltd 11,970

Red Lea Hatchery Pty Ltd 2,218

Red Lea Feed Pty Ltd 2,218

Red Lea Corrugation & Flexo Pty Ltd 2,218

Red Lea Retail Holding Pty Ltd 12,334

Remuneration – 2 June 2018 to later of second creditors meeting and execution of a DOCA

30

“That the future remuneration of the Voluntary Administrators of __________________________(Voluntary Administrators Appointed), from 2 June 2018 to the later of the second creditors meeting or the execution of a DOCA, calculated at the hourly rates as detailed in the circular to creditors dated 5 April 2018, is approved up to a capped amount of $___________, exclusive of GST, and the Voluntary Administrators may pay the remuneration as and when it is incurred from funds under their control.”


Red Lea Chickens Pty Ltd 690,344 (approved by COI on 20 June 2018)










Remuneration – period of DOCA

31

“That the initial remuneration of the Deed Administrators of __________________________ (to be Subject to Deed of Company Arrangement), for the period of the DOCA, calculated at the hourly rates as detailed in the circular to creditors dated 5 April 2018, is approved up to a capped amount of $___________, exclusive of GST, and the Deed Administrators may pay the remuneration as incurred on a monthly basis or as otherwise determined by the Deed Administrators.”


Red Lea Chickens Pty Ltd 307,020










Questions

Second Meeting of Creditors - McGrathNicol · Second meeting of the COI Week one Immediate shut...

Documents

Transcript of Second Meeting of Creditors - McGrathNicol · Second meeting of the COI Week one Immediate shut...