Jan Cameron buys back Retail Adventures – but at what cost?

Bargain-hunting businesswoman Jan Cameron has bought back into the retail chain she attempted to rescue in 2009?—?but she could face a class action.

Cameron has bought back Retail Adventures for $58.9 million after the business was put into administration in October last year. Retail Adventures is Australia’s largest discount store operator and operates Crazy Clark’s, Sam’s Warehouse, Go-Lo and Chickenfeed, with about 236 stores and 5000 employees.

Cameron is not just a retail investor; she made headlines in 2011 when she bought Tasmania’s controversial Triabunna woodchip mill, with media figure and wotif founder Graeme Wood. Cameron initially bought Retail Adventures out of administration in 2009 for $85 million and invested another $80 million over the past three years to keep the business afloat.

Administrator Vaughan Strawbridge of Deloitte Restructuring Service said in a statement he offer received from Cameron’s company, DSG Holdings Australia Pty Ltd, was the highest following a public sale process.

“This is a positive outcome. The sale will ensure jobs are retained for approximately 4700 employees, with many stores located in regional areas. Trade with key suppliers will also continue, landlords will retain tenants, and the network of more than 210 stores will continue to serve local communities and customers.”

Strawbridge says the sale process was complex and time is needed to fully transition supplier contracts, leases and employees to DSG.

Landlords are still to agree on 131 store leases. Strawbridge says DSG will continue to cover entitlements for employees who have been made redundant to date. “This will continue, and the purchase price has been adjusted for employee entitlements assumed and monies paid to the administrators to cover redundancies paid,” he said.

Strawbridge says he expects a deed of company arrangement would be put forward which would need to result in a better return to creditors than had Retail Adventures been placed into liquidation. “The ultimate likely recovery for creditors is unknown at this time and forms part of the administrator’s ongoing investigations,” he said.

But unsecured creditors who are owed $96 million are unlikely to be happy with the deal, and Cameron could face a class action run by litigation funder IMF. IMF managing director Hugh McLernon told Private Media the litigation funder has been supporting creditors to push the administrator to carry out a public examination of the offices of Retail Adventures.

“This examination will be primarily to determine whether the company was allowed to trade while it was insolvent and whether there were any serious preferences paid before it went into administration,” he said.

McLernon says the unsecured creditors are also very interested in the question of whether the security that is held by another Cameron company called Retail Adventures Holdings Pty Ltd is enforceable.

“What we have suggested is that the administrator should have already carried out those investigations, but seeing as he hasn’t, he should call a meeting as soon as possible to give the creditors an opportunity to put the company into liquidation and enable them to take their own action against the officers of the company,” he said. “The reason for that is it seems absolutely clear that the $100 million worth of unsecured creditors will not get a cent from the sale proceeds of the business.”

McLernon says IMF is in the process of formalising the litigation. A spokesperson for Deloitte said the administrators were not aware of any proposed legal actions. “The administrators have not received any information from any creditor on any specific issues of concern,” he said.

 This article was first published on LeadingCompany’s sister site, SmartCompany.