The Australian icon electronics retailer, Dick Smith, has lapsed into voluntary administration this morning, with its creditors appointing receivers to the business as well.
The company announced that it had explored alternative funding but the directors believed that this could not, even if successful, have been enough to meet the company’s short-term funding requirements to order inventory over the next four to six weeks.
The directors of the company believe that there was little option but to appoint a voluntary administrator, with a view to protecting the interests of the company’s owners, creditors, employees, suppliers and others. Firm McGrathNichol has been appointed as voluntary administrator.
The news follows developments yesterday, when Dick Smith’s shares were placed into a trading halt, pending an announcement to the stock exchange about its funding position.
Dick Smith’s major creditors, National Australia Bank and HSBC, have appointed James Stewart from Ferrier Hodgson as receiver, according to reports from News Corp.
The roles of administrator and receiver are different, and while it is beyond the scope of this piece to go into those complexities in detail, basically an administrator’s role is to investigate the company’s affairs, report on those to the company’s creditors, with a view to determining whether the company should be rearranged, wound up, or returned to standard operation. A receiver, however, has a primary obligation to those that appointed him. In this case, NAB and HSBC want their debts repaid, and a receiver will work to sell sufficient assets in order to secure funds for those creditors.
We understand that the business may be broken up, with the New Zealand operation considered quite a profitable and likely candidate for carving up and selling off. How the Australian operations could be restructured is anyone’s guess, but what we can probably safely speculate is that if the Dick Smith brand survives this period, it’ll reemerge a little differently, and probably not quite as big as it once was.
With major outlets calling this the likely demise of the Dick Smith retail brand, we can only wait and see.