Receivership likely for Colorado, says board

Colorado said the proposals had aimed to create a 'sustainable capital structure to support the growth of the business'. Photo / Thinkstock

Transtasman clothing retailer Colorado was placed into voluntary administration yesterday after proposals to boost the company's earnings were rejected by its lenders, causing widespread concern for job losses in New Zealand and Australia.

Colorado's board announced that it was likely the group's lenders would appoint receivers in response to its administration.

Private equity firm Affinity Equity Partners bought the group in 2006 for A$430 million ($585 million).

The board said it was disappointed with the decision, and believed the group could have continued trading had the proposals been accepted.

There are 10 Colorado stores in New Zealand, employing 30 staff. Colorado also owns Colorado Adventurewear, Williams The Shoemen, JAG, Diana Ferrari and Mathers Shoes.

Colorado said the proposals had aimed to create a "sustainable capital structure to support the growth of the business" and offer the company's lenders significant upside potential.

"The board and management last week put forward a proposal formulated with management and our advisers, KPMG, detailing a plan which recommended a way forward for the company and would have secured increased returns to lenders.

"It would also have provided a basis for motivating staff as well as retaining management, suppliers and customers to deliver a positive outcome. The board subsequently revised the proposal in an effort to come to an agreement with lenders. Unfortunately, both proposals were not supported by the requisite number of lenders."

The board admitted that the group had suffered because of a "difficult retail environment for some time".

"The last few months, in particular, have been very challenging given the effects of a tough trading environment in Australia."

Australian analyst Mark Wade said: "Whether it's Borders, Colorado, Feltex, Godfreys ... the common connection is private equity. Specifically, their unbridled enthusiasm to gear up the companies concerned during buoyant times ... has come back to haunt them in tougher times."