Tidings of little joy for PC Company creditors

By PETER GRIFFIN, IT Writer


Suppliers and staff of The PC Company face a grim Christmas.

The collapsed computer retailer has left them out of pocket to the tune of $2 million, and there is "little likelihood" that they will get any of the money they are owed.

A report from Kim Thompson, the receiver who took control of The PC Company in October, paints a worse picture of the company's financial position than many creditors had expected.

It also reveals that the company's managing director and owner, Colin Brown, approached his banker, the ANZ, in May, urging it to start receivership proceedings.

"Back in May Colin recognised he had severe problems and felt he couldn't continue. We went cap in hand to hand to the bank," said Thompson.

The bank decided against proceeding, a move which some in the industry estimate left the ailing company and its creditors up to $500,000 worse off.

The company has assets worth $1.3 million and owes nearly $3.4 million.

Those owed money had expected some cash would be available for the more than 120 unsecured creditors. Dozens of former employees have received holiday pay, but in total they are still $143,000 out of pocket.

The largest unsecured creditors are believed to be computer distributor, Ingram Micro, which is owed up to $500,000, and software maker Microsoft, owed up to $200,000.

Other companies ranging from Carter Holt Harvey, to Telecom, New Zealand Post and the Herald are owed smaller amounts that will probably go unpaid.

Although stock on hand (mainly consisting of computer components stored in The PC Company's Hamilton factory) had a book value of $3.4 million, the receiver estimates it will fetch only $1 million, due to "significant discrepancies in the values and quantities identified".

"Of the stock on the books, there are large quantities that should have been returned to the suppliers for credit. These goods are faulty and now have no commercial value," said Thompson.

Some of the "discrepancies" were put down to stock that had mysteriously vanished during the company's final days.

"There's a feeling of stock shortages by way of theft," he said.

"I've rattled a few cages, but no one's come out in the open and said anything."

But it appears inefficient management had allowed faulty parts to pile up in the warehouse instead of being shipped back to suppliers for refunds.

"They sat on [faulty] stock and didn't do anything with it," said Thompson.

Fixed assets had a value of $1.4 million, but largely related to software and internet development costs that could not be realised.

An exercise to recover $334,000, mostly owed by customers who had yet to pay for their computers, had been "disastrous", said Thompson. Only $39,000 had been recovered and a further $115,000 had been written off.

Preferential creditors including staff, Inland Revenue and Customs will be paid $400,000. Whatever money is left over will go to Brown, who bought out the ANZ's $918,000 debenture on The PC Company, raising a loan to do so.

He expected to get around half of that money back and was now negotiating with the receiver to buy remaining stock, a move he realised would draw criticism.

"I don't have any choice, I'm the only one who can realise any value out of it," he said.

He would spend the Christmas break sifting through computer parts to find out which ones were of any value.

"People said to me the worst part is shutting the business down and that things will get better from there. It's just got worse," he said.

For a company that just last year had a thriving national business and revenue approaching $60 million, its fate is now a quick wind-down and liquidation.

It's a story Thompson sees played out regularly at this time of year: "Some businesses get to Christmas and find they've no money for holiday pay and wages so they shut down."