ASIC Moves In On Dick Smith Directors While Other Retailers Eye Off The Carcass
The Australian Securities and Investment Commission who have more powers, now that Dick Smith has been placed into liquidation, is set to move on former senior executives of the mass retailer with several former executives supplying key information on questionable business activities at the mass retailer.
The big question now is what was not disclosed to shareholders that should have been disclosed.
Yesterday Ferrier Hodgson announced that they were set to terminate 2460 staff in Australia, and 430 in New Zealand, all stores in the network will be closed.
We can also reveal that one the main sticking points for potential bidders was the liabilities associates with the leases for Dick Smith stores as well as costs associated with the restocking of the stores.
Insiders have told ChannelNews that now that Dick Smith is set to be liquidated, several Dick Smith stores could be taken over on new leases’.
Among the retailers interested in several Dick Smith stores in Australia is The Good Guys who made contact with receiver Ferrier Hodgson earlier this month.
Channel News has also been told that some stores in New Zealand could also be sold separately along with the Move stores in Australia, we understand that 20 key sites in Australia have been targeted by interested parties.
One interested party is set to enter negotiations to buy the Dick Smith name and the online operation.
During the next few weeks’ receivers Ferrier Hodgson who has deliberately leaked information to select media in an effort to spin a positive story about Dick Smith is set to make millions from the collapse of the mass retailer while suppliers to Dick Smith are left with millions in losses.
Some distributors could also be placed into liquidation.
Both the National Australia Bank and HSBC are owed over $138 Million however there is little chance of the banks now recovering this money.
Both Indian conglomerate Tata and Chinese consumer electronics retailer baulked at the risks associated with restocking the mass retailers as research showed that the Dick Smith brand was “seriously” damaged.
Currently ASIC is investigating the actions of directors. Several former employees have already supplied statement to ASIC investigators. They include former buyers and management who walked away from the Company claiming to ChannelNews that they were not prepared to “put up or be tarnished” with questionable business activities.
James Stewart from Ferrier Hodgson who has ducked away from any serious questions about the actions of Ferrier Hodgson staff running a so called receivers sale or the the actions of former directors of Dick Smith claims that the banks are facing massive losses.
We have been told that the Banks are already co-operating with ASIC and that information that has been uncovered by the receivers is currently being reviewed by investigators.
Joseph Hayes from McGrathNicol is believed to have already started a formal investigation into the collapse of Dick Smith which has left executives such as Phil Cave the Chairman of Anchorage Capital whose brand is seriously damaged in the investment community, is laughing all the way to the bank with over $300 Million that Anchorage netted from the float of Dick Smith.
Dick Smith the founder of the business claims that the business was only worth $90 million and the hype generated by Nick Aboud and Phil Cave was misleading.
Dick Smith has accused Anchorage Capital the Company that floated Dick Smith netting $520M of “destroying” the business and putting close to 3000 staff out of work.
The founder of the original Dick Smith business said he had no interest in buying back the rights to the ‘Dick Smith’ name or any part of the troubled business.
“I wouldn’t look at buying back the name but I’m incredibly angry about the utter dishonesty of Anchorage Capital and I hope ASIC and the Senate Inquiry do something about them,” Mr Smith said.
Anchorage bought Dick Smith from Woolworths for about $94 million in 2012, before listing it through a $520 million public float 15 months later.
Dick Smith’s inventory was written down by $60 million on December 1 last year, two months after chief executive Nick Abboud issued profit guidance for the 2016 fiscal year of net profit of $37 million to $43 million.
Last week former CEO Nick Aboud did not comment when spotted at Balmoral Beach.
Also ducking for cover is former Chairman Rob Murray.
Hayes is the person acting in the interests of unsecured creditors such as distributors and vendors who have left millions out of pocket. Companies such as Roadhound who are owed over $18M and TV distributor Yale Prima who has told ChannelNews that they are owed over $10.2 Million dollars.
It is now clear that the unsecured creditors will get nothing.
Then there is the inquiry by Senator Nick Xenophon’s whose inquiry into the collapse of “listed retailers” such as Dick Smith is set to go nowhere as it lacks any real powers other than being a means by which politicians can get media exposure in an election year.
The Financial Review said that Stewart is reluctant to give precise numbers in relation to Dick Smith’s current financial position except to say that the company has $200 million in inventory and its employees are owed about $30 million in entitlements.
The employees have priority and will get what they are owed, Stewart says.
Stewart will probably pay the suppliers cash to satisfy the retention agreements and then sell the inventory as part of the normal fire sale process.
He has employed an international inventory specialist, Hilco Industrial, to assist him with the fire sale. Hilco is doing well out of Dick Smith. It was hired by the former owner Woolworths to value its inventory before it was sold to Anchorage Capital Partners in 2013.
Anchorage paid about $94 million for the business in 2013 and then sold it to the share market at a valuation of $520 million about a year later.
But Stewart followed the usual process of a receiver by running a liquidation scenario analysis. He found that the secured lenders would be better served by rejecting the purchase offer.
Stewart said in a statement: “The offers were either significantly below liquidation values or highly conditional or both.”
The sale process was affected by the company’s history. Discretionary retailers have been attractive to private equity which has turned them around and sold them to the market.