Noel Leeming, Eric Watson resolve debt dispute

Eric Watson. Photo / Herald on Sunday

Appliance retailer Noel Leeming has reached an eleventh hour settlement with interests of its former owner Eric Watson over an unpaid debt.

Wall Group, a subsidiary of Watson's investment vehicle Cullen Investments, took action in the High Court to recover a sum relating to a disputed lease. The British-based entrepreneur's Pacific Retail Group sold the Bond & Bond and Noel Leeming chains to Australian private equity firm Gresham for $138.5 million in 2004.

Yesterday the High Court at Auckland was due to hear Wall Group's application for a summary judgment against Noel Leeming Group.

If it had gone ahead and Wall Group succeeded in getting the summary judgment, Noel Leeming would have been forced to pay up or potentially face liquidation proceedings. But Noel Leeming chief financial officer Mark Conelly said the matter was resolved over the weekend.

He said the dispute dated from before the sale and involved less than $100,000. "You wouldn't even describe it as a material amount."

He said there was some surprise Wall Group wanted to pursue it in this way and Noel Leeming had decided to settle before it went in front of the judge. However, he agreed the settlement was last-minute.

Cullen Investments said it had no comment on the dispute.

Noel Leeming hit the headlines this month when it emerged the parent company had breached its banking covenants. The breach was documented in a note to the 2008 Noel Leeming Holdings financial accounts, filed with the Companies Office in July. It said it had occurred subsequent to the company's March year-end, and in April this year the company signed new agreements with its lender BOS International Australia.

Gresham also injected a further $15 million into the company.

Conelly said the breach was no longer an issue. "We are operating under new covenant arrangements and have been consistently meeting them for some time."

Noel Leeming Holdings had just signed off on its March 2009 accounts. The result "inevitably" wouldn't be as good as last year.

The retailer made a tax paid profit of $8.3 million in the 2008 year, down from $9.9 million in 2007. Appliance retailing has been particularly hard hit by the recession. Statistics New Zealand figures show the sector recovered somewhat in the June quarter, with sales growing by 4.5 per cent.

It has been reported that private equity firms typically like to own a business for three to five years, and with Gresham now having owned Noel Leeming for five years it may be looking to sell.