Unsecured creditors voted on Wednesday to put the print group into liquidation with PPB Advisory. The secured creditor, a partnership of US investment firm KKR and Australian firm Allegro known as KKR McKellar (KKRM), is represented by receiver McGrath Nicol.
The move into liquidation opens up new powers of investigation to PPB Advisory, which had also served as Geon’s administrator.
It now appears that trade creditors in Australia and New Zealand are out of pocket to the tune of $29.6 million. That includes debts to both countries’ tax departments.
However, there are no funds left to support any deep digging that might recover funds from voidable transactions, said PPB partner Daniel Walley.
According to a creditors report prepared by PPB, there were 22 preferential payments totalling $1.6 million and two unreasonable director payments worth $220,000 that may be voidable.
“The trick to pursing those claims effectively is you have to prove a period of insolvent trading prior to our appointment,” said Walley.
“Because this business was supported by a secured creditor [KKRM] for a few weeks beforehand, I don’t think the period of insolvency would be very long, which diminishes the opportunity to bring a claim.
“We are unfunded at this period in time. We don’t have any cash in the liquidation and I have been told by the receivers that there won’t be any surplus funds flowing into the liquidation.”
Walley said he would do what he could, “but the extent of my investigation will be limited by the fact we don’t have any funding”.
[Exclusive: Geon insider tells all]
He added that unsecured creditors did have the option of enlisting “litigation funding”, which would be paid for by any money recovered following a legal challenge, but that the cost would probably outweigh any financial benefit.
Walley explained that as it stood, there would be a significant shortfall to cover the various debts to employees, unsecured creditors and the secured creditor.
He said that KKRM would get back roughly half its secured debt. The company was owed $91.8 million by Geon, of which $47 million was secured.
This recovery came from sources such as the auction of Geon’s equipment and the sales of the various Geon businesses.
It has never been officially revealed how much KKRM paid for Geon’s debt. An article in the Australian Financial Review suggested KKRM had paid just $5 million to take over Geon’s debt, in which case the whole bitter saga might have represented a profitable exercise for the pair of investment firms.
Geon’s employee entitlements totalled around $18.2 million; 100 have so far been paid by the government’s Fair Entitlements Guarantee scheme.
PPB’s billings for the administration and liquidation are expected to total $465,000.
Walley also said that in his experience, he had never seen suppliers stand firm in the way the paper merchants held the line against Geon.
“If the supplier decides they don’t want to supply you, that’s up to them and there’s nothing you can do. We try to trade as a going concern and you are reliant on the goodwill of the supplier. If they choose not to, that’s their prerogative and you can’t criticise them for that.
“I haven’t seen something to this extent. Sometimes suppliers choose not to supply you; that is not unusual. But usually you have the choice to switch supply and use other people. Or someone will break ranks eventually and supply you because they know they will get paid. This is probably the surest credit [a supplier] is going to write all year. I can’t think of an instance where a receiver or administrator had not paid a supplier in an insolvency.”
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