Economic rollercoaster claims DPK

SYDNEY: DPK Australia has become the latest in a rash of companies to enter administration, a casualty of poorly timed exchange rate calls and the softening global economy.

The Alexandria-based knit specialist and apparel and fabric manufacturer, which entered voluntary administration on January 28, hit a downward spiral some six months ago, confirmed administrator Manfred Holzman of Sydney-based liquidation and insolvency specialist Holzman Associates.

"They believed it was no longer profitable to manufacture in Australia so they had taken the decision to seek cheaper overseas manufacturers. However they did this on the basis of the Australian dollar being worth 90 cents [US]. When the exchange rate collapsed they ran into trouble. They were quoting on orders a month in advance but when it came time for them to take delivery of the goods, the value of the dollar had dropped to around 60 cents, which completely knocked their margins out."

DPK's troubles were compounded when its order book dropped significantly due to the global economic downturn, Holzman added.

It was hoped the company - a vertically integrated manufacturer of fabrics and garments with a strong focus on innovation trading since the early eighties - might continue to operate, Holzman said.

"There's a possibility of a purchaser Otherwise it faced a number of choices: submission of a Deed of Company Arrangement (a legally binding document between the company, its creditors and the administrator), liquidation, or the 45 day adjournment of a final decision.

Holzman said he was continuing to oversee delivery to DPK customers, manufacture of goods and retention of the company's staff to the best of his ability, in the hope that the company could implement the first option. The benefit of Deed of Company Arrangement was that it would allow the implementation of a revised business plan and strategy, designed to ultimately return the business to profitable trading. It would also provide a greater return to creditors than would otherwise be available if the company were placed into liquidation.

"Creditors might have to accept 90 cents in the dollar as payment, but that is certainly preferable to no payment at all," he said.

However at the time of writing negotiations for the submission of a Deed of Company Arrangement were hampered by a number of issues.

"It's been challenging trying to gain clarity in terms of retention of customer and supplier arrangements. There's also the potential problem caused by containers arriving from overseas and holding "lien" over the goods - in other words the containers are not released unless the appropriate parties have been paid. All this means we haven't yet been able to fully clarify what we're offering. We've had to juggle a lot of balls at the same time."

Customers expecting their orders in May or June were also concerned their goods might not be delivered. However it was hoped outstanding issues could be resolved within weeks, he said.