Lawler Partners recently completed a turnaround engagement for a wholesale baker located in Sydney's west.
The company supplies quality baked goods to retail shops and supermarkets. Notwithstanding that the business demonstrated much potential, in mid 2004 it had a history of directors’ disputes, loss making activities, it was heavily laden with debts and was without the working capital it required to survive.
At this time, one of the directors sought assistance from Lawler Partners. A settlement was reached between the directors and all but one retired their position. The company was subsequently placed into Voluntary Administration in an effort to turn the business around.
The Voluntary Administrator continued to trade and rationalised costs. Strategies were then put in place to concentrate on expanding the profitable side of the client base and to reduce loss making activities. Accounting controls and reporting measures were also implemented.
It was identified that in the event that the company was Liquidated, no return to unsecured creditors would be possible.
A Deed of Company Arrangement (“Deed”) was proposed which would provide a full return to employees on their entitlements, save jobs and also provide a return to unsecured creditors in the order of 15 cents in the dollar.
The Deed allowed for the restructured business to grow and expand during a moratorium period of 18 months from which fixed monthly contributions would be made to a Deed fund.
The Voluntary Administration process was also shortened to just 22 days, instead or the normal 28 days, to further maintain costs in order to maximise the return to creditors.
The Deed was recommend by the Voluntary Administrator and accepted by creditors. The Voluntary Administrator became the Deed Administrator and control of the company was returned to the director.
The company’s trading was monitored during the course of the Deed by the Deed Administrator to ensure compliance. Contributions by the company under the Deed were paid on time and all statutory liabilities subsequently incurred, such as superannuation, GST and PAYG, were kept up to date.
The Deed has now been wholly effectuated with a first and final dividend to unsecured creditors in excess of 22 cents in the dollar.
The strategies and controls implemented by the Voluntary Administrator are still present in the company’s business today.
For more information regarding business turnaround or Voluntary Administration, please contact Bradley Tonks on 02 8346 6013 or btonks@lawlerpartners.com
