First Meeting of Creditors Orlc 92 Pty Ltd 12 April 2018 Red Lea - - PowerPoint PPT Presentation

Red Lea Group

DRAFT

Red Lea Chickens Pty Ltd Orlc 92 Pty Ltd Red Lea Franchise Pty Ltd Red Lea Franchising Pty Ltd Red Lea Logistics Pty Ltd Red Lea Leasing Pty Ltd Red Lea Hatchery Pty Ltd Red Lea Feed Pty Ltd Red Lea Corrugation & Flexo Pty Ltd Red Lea Retail Holding Pty Ltd (All Administrators Appointed) (collectively “the Red Lea Group”)

First Meeting of Creditors

12 April 2018

Red Lea Group 2

• Formalities
• Resolution (concurrent meetings)
• Purpose of meeting
• Purpose of administration
• Background
• Financial position and performance
• Administrators’ actions since appointment
• Wind down strategy and asset realisation
• Employees
• Investigations
• DOCA v Liquidation
• Indicative DOCA
• Questions
• Resolutions (Committee and replacement of Voluntary Administrators)

Agenda

Red Lea Group

Formalities

3

• Open meeting
• Administrator Chairperson: IPR 75-50
• Introductions:

 Barry Kogan (Administrator)  Jonathan Henry (McGrathNicol Director)  Cameron Cheetham (Corrs Chambers Westgarth)

• Quorum: IPR 75-105
• Attendance register
• Voting
• Time and place convenient: IPR 75-30
• Proofs of debt and proxies

Red Lea Group

Resolution – meetings to be held concurrently

4

“That the meetings of creditors of each of the Red Lea Group companies, being:  Red Lea Chickens Pty Ltd  Orlc 92 Pty Ltd  Red Lea Franchise Pty Ltd  Red Lea Franchising Pty Ltd  Red Lea Logistics Pty Ltd  Red Lea Leasing Pty Ltd  Red Lea Hatchery Pty Ltd  Red Lea Feed Pty Ltd  Red Lea Retail Holding Pty Ltd  Red Lea Corrugation & Flexo Pty Ltd (All Administrators appointed) be held concurrently.”

Red Lea Group

Purpose of meeting

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• Convened under Section 436E of the Corporations Act to:

 determine whether to appoint a Committee of Inspection to each Company, and if so, who are to be the Committees’ members; and  consider the removal of the Administrators and appoint an alternative Administrator who has consented to act

• This meeting has no authority to consider any other business
• At the second statutory meeting, a decision is made regarding the Red Lea

Group’s future

Red Lea Group

Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) and remuneration

6

DIRRI

• DIRRI dated 29 March 2018 - distributed with notice of meeting
• DIRRI is available for inspection
• We remain of the view that we are free of any potential conflict of interest
• $500,000 cash indemnity received on 3 April 2018 from a related company, Red

Lea Holdings Pty Ltd

• DIRRI tabled

Remuneration

• Schedule of rates provided with meeting information
• Comprehensive remuneration report will be provided prior to the second meeting
• f creditors

Red Lea Group

Purpose of administration

7

• Directors’ powers are suspended and Administrators are in control
• Voluntary Administration provides moratorium period for investigation /

determination of companies’ future:  Return company to Director;  Deed of Company Arrangement; and  Liquidation.

Red Lea Group

Voluntary Administration timeline

8

VA appointed 29 March 2018 Written notice of first meeting mailed to creditors and employees on 7 April 2018 1st meeting of creditors held Purpose: (i) Replace VA (ii) Consider the appointment

• f a

Committee of Inspection Complete preliminary investigation 2nd meeting of creditors held Options: (i) DOCA (ii) Liquidation (iii) Return to director Issue Administration Report and form

• pinion as to future
• f the Red Lea

Group Administrators take control of Red Lea Group and its assets Receive any DOCA proposals Within 8 business days 12 April 2018 Within 20 business days 7 May 2018 Within 25 business days 14 May 2018

The Easter holiday period impacted the Voluntary Administration timeline

Red Lea Group

Background

9

• Founded in Western Sydney in 1957
• Processing plant in Blacktown, NSW
• The Asif family acquired the Group in 2015
• Significant losses post acquisition, funded by related parties and debt
• Key activities:

 Management of farming operations and livestock grower network;  Processing of chicken livestock into wholesale and retail chicken products;  Distribution of chicken products to retailers and wholesale customers; and  Operation and management of retail and franchise network.

Red Lea Group

Timeline

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Late 2016 Asif family took over day to day management Jan 2016 Major customers enter into insolvency, $4m bad debt exposure July 2016 Properties transferred

• ut of
• perating

entities Early 2016 Logistics business commenced (brought in- house) and retail business commenced Dec 2016 Statutory demand served, leading to major suppliers requiring COD April 2015 $30m Acquisition by the Asif family April 2017 Working capital challenges addressed through debtor finance 29 Mar 2018 Voluntary Administrators appointed June 2015 Net profit of $3.9m June 2016 Net profit of $2.0m June 2017 Net loss of $17.5m Late 2017 YTD18 trading loss of $17.2m March 2017 Offered business for sale, process was unsuccessful

Red Lea Group

Hequ Trading Pte. Ltd (Singaporean entity) Redlea Group Holding Pty Ltd Red Lea Franchise Pty Ltd Red Lea Leasing Pty Ltd Red Lea Franchising Pty Ltd Red Lea Logistics Pty Ltd Red Lea Hatchery Pty Ltd Red Lea Feed Pty Ltd Red Lea Corrugation & Flexo Pty Ltd Orlc 92 Pty Ltd Red Lea Chickens Pty Ltd Red Lea Retail Holding Pty Ltd Assad Ullah Asif (45%) Muhammad Asif (45%) Fatima Batool (10%) Main Trading Entity Logistics Entity Stores and Franchise Network Largely Dormant Entity

Corporate structure

Shareholders

Appointment group

Red Lea Group

Operations

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• Main trading entity and

processing facility

• Employed majority of the

staff

• Management of farming
• perations

Red Lea Chickens

• 7 company owned stores
• 22 franchise stores

Red Lea Retail and Franchise

• Logistics and distribution to

support operations

• c.70 vehicles

Red Lea Logistics Secured creditors: $12m

• Trade creditors: c.$15m
• Employee creditors: $9.7m
• Trade creditors: c.$7m
• Employee creditors: c.$0.4m
• Trade creditors: c.$1.3m
• Employee creditors: c.$0.2m
• Finance lease: c.$7m

Operations and assets Creditors

Red Lea Group

Financial performance – trading companies

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Summary Profit and Loss for the period 1 July 2017 to 28 February 2018 $m Red Lea Chickens Red Lea Logistics Franchise & Red Lea Franchising Total Total revenue 71.2 3.7 1.0 76.0 Cost of sales (79.7) (3.3) (0.1) (83.2) Gross margin (8.5) 0.4 0.9 (7.2) Net other expenses (8.5) (1.2) (0.3) (10.0) Profit/(Loss) before interest and taxation (17.0) (0.8) 0.6 (17.2) Source: Management Accounts, MCN normalisation adjustments

Red Lea Group

Financial position – trading companies

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Summary Balance Sheet as at February 2018 $m Red Lea Chickens Red Lea Logistics Red Lea Francise & Red Lea Franchising Total Assets Inventory 5.8

• 5.8

Trade debtors 8.5

• 0.1

8.6 Less: Receivables finance (7.2)

• (7.2)

Motor vehicles 0.2 8.0 0.0 8.2 GST and other receivables 1.9 0.1 0.0 2.0 Total Assets 9.2 8.1 0.2 17.5 Liabilities Trade creditors (17.1) (1.2) (0.0) 9.5 Employees (5.3) (0.2) (0.1) (5.5) Secured creditors (3.9) (7.3)

• (11.2)

Total Liabilities (26.3) (8.6) (0.1) (7.3) Net Assets/(Liabilities) (17.1) (0.5) 0.1 (17.6) Source: Management Accounts, MCN normalisation adjustments

Red Lea Group

Administrators’ actions since appointment

15

• Secured and insured site
• Attended to wind-down of trading operations (leases, staff, assets)
• Communicated with employees
• Commenced investigations and secured records
• Reviewed secured creditor position

Red Lea Group

Wind down strategy

• Limited funding to continue to trade the business:

 Livestock realised  Stock sold  Staff made redundant

• Fixed assets valued
• Company owned stores closed
• Franchise stores operate independently

Red Lea Group

Employees

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• 400 people employed upon appointment
• Majority of staff made redundant
• Over $10m of entitlements owed:

Type of entitlement Estimate ($m) Superannuation 1.6 Annual leave 2.1 Long service leave 1.7 Pay in lieu of notice 1.3 Redundancy 3.7 Total 10.4

Red Lea Group

Employees (cont’d)

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• Separation Certificates sent to all employees
• Retained c.30 staff to assist Administrators
• Continued engagement with employees providing:

 updates on creditors meetings;  third parties employment opportunities; and  draft employee entitlements calculations

• Employee counselling session after meeting
• Ongoing liaison with Patricia Fernandez of the Australasian Meat Industry

Employees Union

Red Lea Group

Investigations

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The Administrators are investigating the reasons for the Companies’ failure and the conduct of the Directors. We have secured company records including electronic data and emails. Key lines of enquiry include:

• Transfer of real estate, fixed assets and motor vehicles
• Related party transactions and loan accounts
• Insolvent trading (19 statutory demands since the beginning of 2017)
• Discharge of Directors’ duties
• Voidable transactions

 Preference payments  Transactions at undervalue

Red Lea Group 20

Liquidation vs Deed of Company Arrangement

• A DOCA is a binding arrangement

between a company and its creditors.

• We have been advised that the Director

intends to propose a DOCA.

• We expect to receive this proposal in the

next week or so, and will report on it prior to the second meeting. Deed of Company Arrangement (“DOCA”)

• At the second meeting, creditors may vote

for the liquidation of the Companies.

• Voidable transactions can be pursued in

liquidation.

• Employees may access the Fair Work

Entitlements Guarantee Scheme (“FEG”). Liquidation

• In our report to creditors, we will either recommend the DOCA or liquidation.
• The Administrators are preparing for either outcome.

Red Lea Group

Indicative DOCA terms (submitted by Director)

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Structure:

• DOCA contributions to be paid from Red Lea Group Holdings Pty Limited;
• Creditor payments:

 Secured creditors: full repayment  Employee entitlements: full repayment  Unsecured creditors: some return  Related parties: claims deferred (to increase return to other creditors)

• Various releases of Directors/related parties.

Timing:

• Funding in place in the near future;
• Potential for funds to be placed on trust prior to the Administrators’ report;
• Employee dividend paid as soon as possible after DOCA execution;
• Unsecured dividend to follow thereafter; and
• DOCA ends after unsecured dividend paid.

Q & A

Red Lea Group

Resolutions – Committee of Inspection

23

• Role:

 consult with the Administrators about matters relating to the administration;  receive and consider reports by the Administrators; and  approve Administrators’ fees

Red Lea Group

Resolutions – Committee of Inspection – Red Lea Chickens

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• Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Red Lea Chickens Pty Ltd (Administrators Appointed)”.

Red Lea Group

Resolutions – Committee of Inspection – Orlc 92

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• Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Orlc 92 Pty Ltd (Administrators Appointed)”.

Red Lea Group

Resolutions – Committee of Inspection – Red Lea Franchise

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• Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Red Lea Franchise Pty Limited (Administrators Appointed)”.

Red Lea Group

Resolutions – Committee of Inspection – Red Lea Franchising

27

• Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Red Lea Franchising Pty Ltd (Administrators Appointed)”.

Red Lea Group

Resolutions – Committee of Inspection – Red Lea Logistics

28

• Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Red Lea Logistics Pty Ltd (Administrators Appointed)”.

Red Lea Group

Resolutions – Committee of Inspection – Red Lea Leasing

29

• Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Red Lea Leasing Pty Ltd (Administrators Appointed)”.

Red Lea Group

Resolutions – Committee of Inspection – Red Lea Hatchery

30

• Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Red Lea Hatchery Pty Ltd (Administrators Appointed)”.

Red Lea Group

Resolutions – Committee of Inspection – Red Lea Feed

31

• Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Red Lea Feed Pty Ltd (Administrators Appointed)”.

Red Lea Group

Resolutions – Committee of Inspection – Red Lea Corr. & Flexo

32

• Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Red Lea Corrugation & Flexo Pty Ltd (Administrators Appointed)”.

Red Lea Group

Resolutions – Committee of Inspection – Red Lea Retail Hlding

33

• Resolution – Committee of Inspection (if required)

“That: ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… ………………………… representing ………………………… be appointed to the Committee of Inspection of Red Lea Retail Holding Pty Ltd (Administrators Appointed)”.

Red Lea Group

Resolutions – Replacement of Voluntary Administrator

34

• Resolution – replacement of Voluntary Administrator (if required)

“That Barry Kogan, Jason Preston and Kathy Sozou are replaced as administrators of the Red Lea Group and …………………………………………………… is/are appointed as Voluntary Administrators of the Red Lea Group”.

Red Lea Group