Levels 6 & 7, Spicer House 148 Victoria Street P O Box 246 Christchurch, New Zealand Tel: 03 379 5155 Fax: 03 366 1571 info@chc.bdospicers.com www.bdospicers.com
SOUTHERN ALPS SOCKS LIMITED (IN RECEIVERSHIP) (“the Company”) Receivers’ First Report on the Company’s State of Affairs
Pursuant to Section 23 of the Receiverships Act 1993 (“RA93”) Company Number: 140690 Report Date: 8 July 2009 INTRODUCTION We, Stephen Tubbs and Brian Mayo-Smith, Chartered Accountants, were appointed Joint Receivers and Managers (“the Receivers”) of the Company on the 28th day of April 2009 by Westpac New Zealand Limited (“the Bank”) under the powers contained within a General Security Agreement (“GSA”) dated 4 September 2007. The property in Receivership comprises all of the assets, property and undertakings of the Company. EVENTS LEADING TO OUR APPOINTMENT The Company was placed into receivership following the demand for the repayment of banking facilities, made to other entities of whom the Company had provided security for their indebtedness by cross guarantees. The standard of financial reporting and corporate governance have, in our view, been inadequate for a company of this size and have been significant factors in the Company’s underperformance and entry into receivership. The Company is wholly owned by Lane Walker Rudkin Industries Limited (In Receivership) and specialises in the production of socks. STEPS TAKEN SINCE APPOINTMENT Since our appointment as Receivers we: • • • • • Served notice of our appointment as required by law; Arranged for the Public Notice of the Receivers appointments; Advised the Registrar of Companies of our appointment; Ensured that adequate insurance cover was in place for the Company’s assets; Initiated a complete stock take;
Partners Ron Brooking
Stephen Tubbs
John Hooper Auckland
Julie Millar
Warren Johnstone Wellington Invercargill
Member Firms in Bay of Islands Member of BDO International
Hamilton
Rotorua
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Liaised with the Company’s bankers, solicitors and other advisers with a view to determining the most effective strategy for maximizing returns for all creditors; Sought legal advice as to the extent of securities registered, the contractual relationships with customers, employment rights of employees and other issues arising, as necessary; Liaised with the Company’s customers and suppliers for the purposes of determining whether jobs should be completed for the purposes of maximising returns to creditors; Informed employees of our appointment, and sought to reduce employment expenses where necessary; Undertook a national advertising campaign requesting expressions of interest; Commenced detailed negotiations with several interested parties; Sought legal advice as to the extent of securities registered and other issues arising, as necessary; Continued the trading of the Company under the control of the Receivers for the purposes of: • • • Completing cash flow positive orders; Mitigating against contractual losses; Preserving the business entity whilst sale negotiations were continuing;
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Liaised with unsecured creditors; Verified the extent of preferential entitlements to the Inland Revenue Department and employees in respect to wages, salaries, holiday pay, and other contractual entitlements;
PARTICULARS OF DEBTS AND LIABILITIES CURRENTLY OUTSTANDING AND REQUIRING TO BE SATISFIED FROM THE PROPERTY IN RECEIVERSHIP In accordance with section 23(1)(c) RA93, the secured creditors outstanding at the date of the receivership are as follows: Preferential creditors At the date of our appointment the Company’s records show the preferential creditors to be as follows;
Southern Alps Socks Limited (In Receivership) Summary of Preferential Creditors $ Employees (Estimated) Inland Revenue Department Source: Company records and IRD statements 66,820 101,000
It should be noted that these figures are provisional, pending verification.
Secured creditors At the date of our appointment the company records show the secured creditors to be as follows;
Southern Alps Socks Limited (In Receivership) Summary of Secured Creditors $ Westpac New Zealand Limited Royal Wolf Trading Limited Source: Company records 461,521 (Unknown)
It should be noted that some of the secured creditors also have cross guarantees from other members of the Lane Walker Rudkin Group. Unsecured Creditors At the date of our appointment the company records show the unsecured creditors to be as follows:
Southern Alps Socks Limited (In Receivership) Summary of Unsecured Creditors $ Unsecured Creditors Source: Company records 396,962
Based on current information it is unlikely any funds will be available for unsecured creditors. No account of residual lease liabilities has been included. PROPOSALS FOR DISPOSAL OF RECEIVERSHIP PROPERTY In accordance to section 23(3) of the Receiverships Act 1993, further details for the disposal of the property in receivership, beyond that outlined earlier in this report, have been omitted as their inclusion may materially prejudice the exercise of the receiver’s functions. PARTICULARS OF ASSETS AND LIABILITIES At the date of our appointment the company records show the assets and liabilities of the Company on a consolidated basis to as follows;
Southern Alps Socks Limited (In Receivership) Statement of Financial Position as at 28 April 2009 $ (Book Value) Assets Current Assets Fixed Assets Total Assets Liabilities Current Liabilities Total Liabilities Net Assets 1,136,179 1,792,256 2,928,435
824,174 824,174 2,104,261
Equity Owners/Shareholders Equity Retained Earnings Current Year Earnings Total Equity
Source: Company Records
2,589,152 (186,234) (298,657) 2,104,261
The particulars have been prepared from the Company’s records and information provided to us by management. In preparing the particulars we have not carried out anything in the nature of an audit. We retain the right to amend the particulars if we consider it necessary in light of information which becomes known to us after the date of this report. Pursuant to Section 23 of the Receiverships Act 1993, we have excluded any comment as to actual or future anticipated realisations, as to do so could or materially prejudice our ongoing strategies at this stage of the receiverships. INFORMATION PROVIDED BY THE COMPANY The director of the Company has co-operated in making available the information required by the Receivers to complete this report. Dated 8th day of July 2009
STEPHEN J TUBBS Joint Receiver and Manager
Partners and staff of BDO Spicers whilst acting as receivers and managers do so as agents of the companies without personal liability