Sarantinos, in the matter of Payless Shoes Pty Ltd (Administrators Appointed)
[2016] FCA 1512
•9 December 2016
FEDERAL COURT OF AUSTRALIA
Sarantinos, in the matter of Payless Shoes Pty Ltd (Administrators Appointed) [2016] FCA 1512
File number: NSD 2120 of 2016 Judge: YATES J Date of judgment: 9 December 2016 Catchwords: CORPORATIONS – voluntary administration – application to extend the convening period for the second meeting of creditors Date of hearing: 9 December 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 13 Counsel for the Plaintiffs: Mr J Hynes Solicitor for the Plaintiffs: Jones Day ORDERS
NSD 2120 of 2016 IN THE MATTER OF PAYLESS SHOES PTY LTD (ADMINISTRATORS APPOINTED) ACN 162 529 455
JIM SARANTINOS, JAMES STEWART AND PETER GOTHARD AS JOINT AND SEVERAL VOLUNTARY ADMINISTRATORS OF PAYLESS SHOES PTY LTD (ADMINISTRATORS APPOINTED) ACN 162 529 455
First Plaintiffs
PAYLESS SHOES PTY LTD (ADMINISTRATORS APPOINTED) ACN 162 529 455
Second Plaintiff
JUDGE:
YATES J
DATE OF ORDER:
9 DECEMBER 2016
THE COURT ORDERS THAT:
1.Pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (the Act), the convening period for the meeting of creditors of Payless Shoes Pty Ltd (administrators appointed) (the Company) required to be held pursuant to s 439A of the Act be extended up to midnight on 20 March 2017.
2.Pursuant to s 447A(1) of the Act, and in respect of the Company, Pt 5.3A of the Act operate as if:
(a)section 439A(1) of the Act also provided that the second meeting of creditors of the Company required by that section may be convened at any time within the convening period (including within the convening period as extended pursuant to section 439A(6));
(b)section 439A(2) of the Act provided that the second meeting of creditors of the Company must be held within five business days from being convened in accordance with s 439A(3) and (4), being a date not necessarily within five business days from the end of the convening period (including the convening period as extended pursuant to s 439A(6)); and
(c)section 439A of the Act operated generally to permit the convening and holding of the second meeting of creditors of the Company during the convening period (including the convening period as extended pursuant to section 439A(6)) provided the requirements of s 439A(3) and (4) are complied with.
3.With respect to:
(a)those creditors (including persons claiming to be creditors) of the Company for whom the plaintiffs have a current post, facsimile or email address (the Known Creditors); and
(b)the Australian Securities and Investments Commission (ASIC),
the plaintiffs inform the Known Creditors and ASIC of these orders by means of a circular forwarded by post, facsimile or email (as appropriate) within seven days.
4.With respect to all creditors of the Company for whom the plaintiffs do not have a current post, facsimile or email address, the plaintiffs are to inform those creditors of these orders by making copies of the documents filed in these proceedings (together with these orders) available on the website maintained by Ferrier Hodgson at within seven days.
5.The following parties be granted liberty to apply on giving all other interested parties not less than three business days’ notice:
(a)any person, including any Known Creditors or ASIC, who can demonstrate a sufficient interest to modify or discharge Orders 1 and/or 2; and
(b)the plaintiffs.
6.The costs of and incidental to the originating process dated 9 December 2016 be costs and expenses in the administration of, and be paid out of the assets of, the Company.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)YATES J:
The first plaintiffs are the joint and several voluntary administrators of the second plaintiff, Payless Shoes Pty Ltd (administrators appointed) (the company), who were appointed on 22 November 2016. They seek an extension of the convening period for the second meeting of creditors of the company. Unless extended, the convening period will end on 20 December 2016 and the second meeting of creditors will need to be held by 29 December 2016. The application is supported by an affidavit made on 9 December 2016 by one of the first plaintiffs, Mr Sarantinos.
THE POSITION OF THE COMPANY
The company is one of Australia’s largest shoe retailers. It currently operates 132 retail stores across Australia. These stores are held under lease. The company also operates an online store through an e-commerce website that has over 15,000 registered customers and 120,000 website visits per month. The company conducts its head office and a centralised warehouse from leased premises in Rydalmere, New South Wales. At the time of the plaintiffs’ appointment, the company had 739 employees.
On presently known information, the company has in excess of 800 creditors with claims totalling approximately $45 million, comprising employee claims of approximately $1,720,000, trade creditor claims of approximately $2,265,000 and an inter-company creditor claim of approximately $41,365,000. The plaintiffs presently estimate that there will be a substantial shortfall to creditors. Four trade creditors have claimed purchase money security interests over the company’s inventory. A number of other security interests are registered on the Personal Property Securities Register. However, as at today’s date, no claims have been submitted to the first plaintiffs in respect of those interests.
Since 2013, the company has been operating with the financial support of its ultimate holding company, PSS Holdings, a company incorporated in the Cayman Islands. PSS Holdings is the inter-company creditor to whom I have referred. The financial support provided by PSS Holdings has now ceased. It was the cessation of this support that led directly to the appointment of the first plaintiffs as administrators.
The company is currently trading on a “business as usual” basis under the control of the first plaintiffs. The first plaintiffs have commenced a public process for the sale of the company’s business as a going concern. This has involved them making direct approaches to interested parties and publishing advertisements for the sale of the business.
The first meeting of creditors was held on 2 December 2016. At that meeting, the creditors were informed that as a result of the sale process in contemplation, it would be in their best interests if the administration were to be extended for a period of between 60 and 90 days. The creditors were informed that the plaintiffs intended to make an application to the Court to extend the convening period for up to 90 days. Mr Sarantinos, who was the chairman of the meeting, has given evidence that there was no objection expressed to this course being adopted.
In his affidavit, Mr Sarantinos has set out the plaintiffs’ strategy for conducting the sale process. The strategy includes developing a contingency plan for store closure in the event that a going concern sale cannot be achieved. The key milestones for the sale include a deadline for short listed parties to submit binding offers, with 23 December 2016 appointed as the target date for execution of a sale and purchase agreement. On this scenario, completion of such a sale would take place in mid to late January 2017.
The evidence before me is that, at the present time, the plaintiffs have two non-binding offers under consideration. The plaintiffs are also in discussions with two additional parties who may submit offers.
REASONS FOR MAKING THE APPLICATION
Mr Sarantinos has expressed the view that it would be in the interests of creditors for a sale of the company’s business to be pursued, particularly while the company remains in administration. Put simply, his reasons are that this would maximise the opportunity to complete a going concern sale, and improve the return to creditors. Mr Sarantinos further explained these reasons in his affidavit. His reasons centre on, understandably, the benefit of the statutory moratorium.
Mr Sarantinos said that if a sale of business cannot be achieved, then the best interests of creditors would be served by an orderly sale of the company’s inventory in the January/February 2017 period so as to take advantage of the business’s strongest selling months. Once again, this strategy would be assisted by the statutory moratorium.
For these reasons, the plaintiffs seek an extension of 90 days, although Mr Sarantinos has said that if a sale is completed well in advance of the 90 day period, the plaintiffs would convene the second meeting as soon as possible.
CONSIDERATION AND DISPOSITION
The plaintiffs have established a sufficient basis for the extension that they seek. Having regard to the evidence before me, I am satisfied that an extension of 90 days is appropriate. In arriving at this conclusion, I have taken into account the alternative strategies that are proposed and the evidence given as to the likely steps involved in putting those strategies into effect, including the timing that would be required.
Orders will be made as sought.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate:
Dated: 13 December 2016
0
0
0