The Australian unisex fashion chain operated 14 stores across Melbourne, Sydney and Perth before sinking in debt.
The announcement of it plummeting into liquidation on www.ragtrader.com.au follows a lengthy public and competitive trade sale process, which concluded with the sale of Satch assets and businesses to parties related to the founder and director, Jim Sachinidis. BDO Partners Stephen Dixon and Laurence Fitzgerald were appointed joint and several administrators on September 1, and at the second meeting of creditors on October 6 it was agreed to put the business into liquidation.
The administrators believe the company’s internal reporting was inadequate and also said directors’ drawings were at ‘excessive levels’, given the poor trading performance and position of the company. The assets sold consist of inventory, fixtures and fittings and lease obligations for nine Satch-branded stores. Employee entitlements were transferred to the new owner.
The stores in Melbourne, Sydney and Perth will operate under a new corporate structure and a total of three loss-making stores were closed during the administration.
“The offer was the best of more than 20 expressions received by the administrators after advertising,” Dixon said. “This was the best possible outcome for employees. Most retained their jobs, with only three redundancies and their employee entitlements were protected.”
In minutes from the first creditors’ meeting obtained by Ragtrader, Dixon, who chaired the meeting, was quizzed by creditors about Satch’s downfall.
“The company experienced a significant decrease in sales and also large unpaid superannuation amounts were discovered - which put further strain on the company’s cash flow. The company had entered into a payment agreement with the Australian Taxation Office for the unpaid superannuation amounts which the company subsequently defaulted,” Dixon said.
The minutes also stated that approximately $3.9 million was owed to secured creditors and at that time it was thought about $7.9 million was owed to creditors, but this was subject to change as information was still being submitted. According to the minutes, more than $400,000 was owed to one of Australia’s leading manufacturers, Travellers Apparel, who also supply to Saba and Country Road. Hong Kong-based manufacturer Kentex Enterprises Ltd was seeking more than $200,000 and hundreds of thousands of dollars were listed as owed to more than 50 other creditors.
Proceeds of the sale will go to the priority creditors pursuant to the securities held over the assets of the business.
The priority creditors were required to consent to the sale and no other creditors received a return.
Dixon said the administrators identified several reasons for the collapse of the company.
“Sales had declined by more than 20 per cent from 2010 onwards, partly due to the general economic downturn, combined with higher overheads, an increase in competition in the boutique clothing sector and not having the optimum mix of trading stock,” Dixon said.
Pippa Chambers