REDGroup plan to offer 3 cents in dollar

After REDGroup went into voluntary administration their Whitcoulls and Borders businesses were sold as going-concern businesses. Photo / Dean Purcell

Ferrier Hodgson, the administrators of Whitcoulls' previous owners, REDgroup Retail, have proposed that its unsecured New Zealand creditors be paid out at 3c in the dollar.

The proposal, or deed of company arrangement (DOCA), will be put to creditors at a so-called "'watershed" meeting set down for Thursday.

"Based on our investigations, we do not believe that any dividend would be payable to unsecured creditors in any of the companies should they be placed in liquidation," said Ryan Eagle, administrator and Ferrier Hodgson partner.

"As a result of this analysis we recommend to creditors that the proposal for a DOCA be supported," he said.

REDGroup went into voluntary administration in March, owing New Zealand unsecured creditors $21.5 million.

The watershed meeting follows the administrators' recent sale of the Whitcoulls and Borders businesses to the James Pascoe Group, and the sale of the Bennetts bookstores and 10 Whitcoulls bookstores located in New Zealand airports.

The administrators' report concluded that it was unlikely the group was insolvent for any material period before its collapse and no breaches of directors' duties had been identified.

A second meeting of Australian creditors will be held in Melbourne on the same day to consider a similar DOCA, which is also expected to deliver 3c to unsecured Australian creditors.

If the New Zealand proposal is approved, the Inland Revenue Department will be paid the full $1.4 million priority amount owed.

Employees and Customs will also be paid.

At up to A$635 ($795) an hour for a partner, Ferrier Hodgson's services did not come cheap.

Voluntary administration is common in Australia but relatively new to New Zealand.

The insolvency specialists said the process had allowed the sale of three going-concern businesses, saved a national brand and had saved about 1,000 New Zealand jobs.