The Administrators of Starleaton Holdings and SDS Bidco, Cathro Partners, will reconvene the adjourned 2nd meeting of creditors on Friday 15th March, for the purpose of creditors voting on whether to accept the DOCA (Deed of Company Arrangement), proposed by one of the directors, or to Liquidate the companies. In either scenario, a return of between 0 and 3 cents in the $ to unsecured creditors is the likely outcome, with ex-employees doing better at 83-100 cents in the $.
Under a DOCA, Starleaton HQ Artarmon would become the sole branch
Wide Format Online has been informed the reason for Starleaton's collapse into administration is cited as: " Deterioration in trading performance, poor cash flow, funds tied up in inventory, poor strategic management and loss of related party financial support." The related party support being from founders Peter and Leanne Eaton and their companies - who are also the largest creditors.
The purpose of the March 15th meeting will be to determine is for creditors to resolve:
- that the Companies execute a Deed of Company Arrangement; or
- that the Administration should end; or
- that the Companies be wound up.
If the DOCA is voted in, the estimated dividend from the companies would be:
- Priority employee creditors: 100 cents in the $ incl. super (paid in installments over 12-24 months
- Unsecured creditors 1-3 cents in the $
- Secured creditors most likely paid over time
If the DOCA is rejected, the companies will automatically fall into Liquidation, and the estimated dividend might be:
- Priority employee creditors: 83-100 cents in the $ excl. super (paid when liquidation is completed)
- Unsecured creditors 0-3 cents in the $
- Secured creditors 3-14 cents in the $
However, if liquidated, Starleaton's ex-employees would be able to lodge claims under the FEG scheme, which would return entitlements (but not super owed) in a shorter time, usually 8-12 weeks, rather than 12-24 months. Superannuation claims are a matter for the ATO. A seprate administrator's conference with ex-employees has been proposed.
Return of directors & restructuring
If the DOCA is executed, full control of the Companies and their business returns to Starleaton's directors, with a Deed Administrator acting as overseer; typically the Administrator.
Key to the DOCA is the establishment of a DOCA fund, proposed as $800,000 paid in equal monthly instalments over a period of 24 months. Additional contributions are possible, in order to ensure priority employee creditors are paid 100c in the dollar and participating ordinary unsecured creditors receive 1c in the dollar.
Security for the DOCA funding would be by way of AllPAAP (all present and after-acquired property) - a type of security available to back up credit - which would be a security interest over the companies' assets in favour of the Deed Administrators.
The ALLPAAP secured creditors who would agree to subordinate their security and provide the Deed Administrators ALLPAAP priority ahead of their security interests are: Peter & Leanne Eaton; Starleaton Pty Limited (which is not in administration); and SDS Distributions Pty Ltd.
The DOCA would include a restructuring of Starleaton's business including closure of WA, Vic and Qld operations and a single warehouse/office in Artarmon, Sydney; downsizing to six employees and, it is believed, a focus on purely consumable supply purchased on a cash basis. Further details are being sought on how this would work, given that several previous suppliers of consumables have announced alternative channels. the proposed methodology is currently 'commercial in confidence.'
The situation regarding customers who prepaid Starleaton for capital equipment but never received it appears vexed, subject to separate litigations and under investigation with regards to security interests of the purchasers.
More as it comes to hand and following next Friday's resumed creditors meeting and voting.
The cost of the administration thus far amounts to $465,885, with a further estimated $100,000 to administer the DOCA, or $150,000 to Liquidate the companies if wound up.
