Furious unsecured creditors of Perth based Picton Press are up in arms, as the company is set to come out of administration with a Deed of Company Arrangement (DOCA) that the administrator says will see most of those creditors receive between just 1c and 2c in the dollar for the $2.25m they are owed.
The directors' proposal for a Deed of Company Arrangement was passed at the reconvened second creditors meeting, which saw it get over the line in numbers of people thanks to employees, but fail in the money vote from the unsecured creditors. Chairman Jeremy Nipps of administrator Cor Cordis declared the votes a deadlock, and used his chairman's casting vote to push through the DOCA, in line with his recommendation in the report to creditors, and providing creditors present with reasoning for doing so.
The DOCA, which Nipps hopes to have signed and finalised by the end of the month, will see Picton directors Garry Kennedy and Dennis Hague back in full charge of the company, which they have been running since putting it into VA in May with Nipps handling all the finances since then.
Unsecured creditors are owed $2.25m, but under the DOCA the debts will be parked in a creditors trust, into which the directors Kennedy and Hague will put $205,000 when the DOCA is signed, and a further $290,000 in 12 months time.
On the day of the meeting the 27 Picton employees were first asked to a 10am meeting with the administrator, where he reminded them of the options and their likely returns outlined inthe creditors' report. Not surprisingly when the creditors meeting took place at 1pm they all voted for DOCA.
A further vote was then taken at the 1pm meeting on the basis of the money owed, which saw the DOCA proposal defeated by $1.98m of the $2.25m. Nipps then cast a deciding vote, in favour of the DOCA in line with his recommendation in the report to creditors, and providing again the reasoning. One of the creditors present told Print21, "I couldn't believe it, we voted against and it still got through."
The ATO, which is the biggest creditor at $1.3m voted against the DOCA, and is pursuing its winding up order against the company, the case is due to be heard in court on November 27. However Jeremy Nipps of Cor Cordis says he is confident an agreement with the ATO can be reached before then.
The ATO though is under pressure from its newly established $320m anti-phoenixing unit to not be seen to be allowing companies to shed their debts and carry on. One outraged creditor told Print21, "It's a disgrace. If the ATO lets this go through that new unit may as well go fishing, at least they would enjoy being completely ineffective."
Nipps is dismissive of claims that the DOCA is effectively a phoenix ploy under another name, he says, "There is nothing untoward in this whole process. Due process has been gone through. It is not a phoenix. The DOCA is a better outcome for everyone than liquidation. The process complies with the Corporations Act and the ATO did not sight any concerns at the meeting or during the process as to concerns of phoenix. In fact as noted in the meeting had the directors made a further contribution of funds the ATO was likely to have supported the DOCA."
Rival Perth printers, and indeed printers around the country, are unlikely to see it that way though, as Picton has effectively shed 98-99 per cent of its unsecured debt, and will now carry on with the same directors and the same kit in the same market.
Nipps says, "Picton will be on the ATO watchlist for sure, and will have to pay its creditors on time going forward. I accept the DOCA will be a bitter pill to some, but it is the best outcome.
"The company has been trading well since May, and has just won new contracts with two of its biggest customers, which is pleasing."
According to the creditors report prepared by Cor Cordis Picton hit trouble four years ago when it installed its new B1 ten-colour perfector at the same time as the WA economy collapsed. The press was bought on the basis of an $11m turnover, but turnover went from $12.5m in 2011 to $7m in 2017.
Debts owed by Picton include $2.25m to unsecured creditors, $663,500 to employees, and $6.8m to secured creditors, of which $5m is owed to the primary creditor Westpac against the directors’ property, $1.46m owed to the secondary creditor NAB against the KBA ten-colour, and $382,000 owed to the third creditor, the CBA, against the company’s two Kodak Nexpresses.
Of the unsecured creditors the ATO is owed $1.3m, with paper merchant Ball & Doggett owed several hundred thousand dollars, although the merchant was insured. Total amount owed to unsecured creditors owed more than $10,000 apart from the ATO is $884,000, with $94,000 in total owed to those with less than $10,000 due. Related parties are owed $1.27m, with Dennis Hague in for $800,000 of that.