In early February, following the review of the companies’ strategic options and future funding requirements, the Group sought confirmation from Skidmore of its intention to provide the continuing financial support needed to meet its future funding requirements, and to refrain from requiring the repayment of existing loans during that period.
“We understand that, during the (Canadian) weekend of 4 - 5 February 2017, Skidmore decided to no longer support the companies and that, upon being informed of that decision, the board of each of the companies determined that they could not continue to incur debts and appointed administrators on the morning of 6 February 2017 in Australia,” the report stated.
The Allphones Group’s financials over the past several years reflect the combined struggles it experienced in the lead-up to its administration.
Revenue declined from $141 million to $61 million from FY14 to FY16, following the cancellation of key contracts, most notably Virgin Mobile. The companies reacted to this by cutting direct costs and improving the gross margin percentage, but overheads remained high, the administrators said.
As a result, during the same period, EBITDA worsened from negative $5.5 million to negative $10.2 million.
“Our view is that the companies only became insolvent immediately prior to our appointment when Skidmore withdrew its financial support,” the report said, but added that the administrators “do not expect there to be any insolvent trading claims worthy of pursuit”.
Over the course of the administration period, the administrators have downsized the Allphones Group head office staff from 37 to seven and closed of 18 Allphones-branded company stores that were unprofitable.
Now, following the initial investigation and a call by the administrators to extend the convening period for the Allphones Group, Skidmore has stepped up with some fresh cash and a proposal for six deed of company arrangements for all but one of the companies in administration.
Skidmore is contributing more than $2.18 million in total across the six deeds, with the deed proposals containing several key features: payment in full of the entitlements of each employee of the companies and payment in full to licensees and franchisees of all licensee and franchisee commissions owing.
The cash is also intended to help deliver a return to all other external unsecured creditors of the companies greater than that they would receive via a full-blown liquidation of the Group.
The deed proposals also see Skidmore forego the claim for shareholder loans of $38.9 million, and provide the “prompt return” of Allphones Group to its directors through a creditors’ trust.
However, there are a number of assets still to be realised and liabilities still to be agreed and resolved, the administrators said.
“We are of the opinion that it is in the best interests of the creditors of each of the eight companies in respect of whom a deed proposal has been made, to vote in favour of the proposed deeds rather than a winding up,” the administrators told creditors.