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EXCLUSIVE: Taxman battles administrator over Picton plan

Monday, 05 November 2018
By Wayne Robinson

Seeking DOCA: Picton Press directors Garry Kennedy (left) and Dennis Hague

The directors of stricken WA printer Picton Press are seeking to take back control of the company through a Deed of Company Arrangement (DOCA), but the ATO sensationally blocked its progress in the second creditors’ meeting this week.

At the meeting the administrator spent time explaining to the unsecured creditors that a DOCA – which would hand back control of the business to the current owners Garry Kennedy and Dennis Hague – was the best way forward, as it would give the creditors the most money. The alternatives it said were either winding up the company or ending the administration, both of which would provide worse outcomes for unsecured creditors.

However, once Jeremy Nipps from administrator Cor Cordis had finished his presentation recommending the DOCA, and opened up for questions, the ATO spent the best part of an hour – by speakerphone – grilling him over why things would be any different if the company kept going.

Nipps then moved to the resolutions, the first of which was to agree to Cor Cordis remuneration for work carried out so far, to the not inconsiderable sum of $344,000, before the vote on whether to accept the DOCA proposal.

The vote on the administrator’s remuneration is usually a formality, albeit okayed through gritted teeth, but in an almost unprecedented move the ATO voted against, and as the largest unsecured creditor – with more than half of the debt – the vote failed, and Nipps, after recovering from shock, adjourned the meeting without moving to the rest of the votes, including the vote on DOCA, leaving the future of the company in limbo.

The ATO then took its winding up order back to the court the next day, with Cor Cordis seeking an adjournment. Unlike the previous two occasions where it sought and won adjournments without any issues, this time it had to present an affidavit to the court, the contents of which it managed to have suppressed. The court agreed to adjourn and set a new date of November 27.

Industry insiders say the ATO is under intense pressure from the government’s newly established anti-phoenixing unit to make sure it is not or is not perceived to be enabling phoenixing. DOCA is a fully legal mechanism, intended to allow debt-laden businesses to negotiate with their creditors and agree a timeline for an agreed part repayment of the debt from a business that then trades on. However in practice it often means the company in trouble is able to offload its debts for a fraction of the amount it owes and carry on as before.

This leaves rival companies furious, as they argue they are having to price their jobs to pay their tax bill and other unsecured creditors in full, where the DOCA company does not.

Debts owed by Picton include $2.25m to unsecured creditors, $663,500 to employees, and $6.8m to secured creditors, of which $5m is owed to the primary creditor Westpac against the directors’ property, $1.46m owed to the secondary creditor NAB against the KBA ten-colour, and $382,000 owed to the third creditor, the CBA, against the company’s two Kodak Nexpresses.

Of the unsecured creditors the ATO is owed $1.3m, with a major paper merchant owed several hundred thousand dollars, although the merchant was insured. Total amount owed to unsecured creditors owed more than $10,000 apart from the ATO is $884,000, with $94,000 in total owed to those with less than $10,000 due. Related parties are owed $1.27m, with Dennis Hague in for $800,000 of that.

Cor Cordis says if the company is liquidated all unsecured creditors will receive nil cents in the dollar on the debts. Employees will receive 100c in the dollar in DOCA, but down to as little as 2.6c in the dollar if the company goes into liquidation.

The DOCA would enable the administration to end, and Picton directors Garry Kennedy and Dennis Hague to run the company as before, but with the $2.25m debt to unsecured creditors placed in a creditors trust, which would pay 15c in the dollar for creditors owed more than $10,000 – which is almost all of it – and between 79c and 100c in the dollar to those owed less than $10,000.

Hague and Kennedy have said they will put $205,000 into the trust within a month and a further $290,000 by next December. Under the proposed creditors trust employees will receive 100c in the dollar that is owed to them.

Cor Cordis has had the business up for sale since May, with 23 parties expressing an interest. All offers have been considered in conjunction with the DOCA proposal. Of the 23 parties 18 received confidentiality agreements, and five made offers, but all of them were only for the main press, a KBA ten-colour B1 perfector, with the offers likely to have come from the big UK and German second-hand machinery dealers.

Print21 has reached out to Garry Kennedy and Dennis Hague for comment.

3 Responses to “EXCLUSIVE: Taxman battles administrator over Picton plan”

  1. November 03, 2018 at 9:35 am,

    banksy
    said:

    Wait – did the ATO finally kill phoenixing in print?

    What a glorious day! And even better they are refusing to play the game with the scumbag insolvency industry who promulgate these plans while looting the corpses for themselves.

    I hope the ATO keep it up and nail all of these guys to the wall.

  2. November 05, 2018 at 9:56 pm,

    Cobber
    said:

    The Phoenix will rise

  3. November 06, 2018 at 10:07 pm,

    Old Fashioned
    said:

    An interesting article, a few questions that would be worth further discussion:

    i) so what happens with the $660,000 of employee entitlements?

    ii) if the staff agree to the DOCA does it affect their eligibility for GEER’s?

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