STARLEATON BACK FROM BRINK WITH DOCA

Stricken wide-format supplier Starleaton has narrowly escaped liquidation, securing a DOCA to start again, but unsecured creditors are still facing losing almost all their money.

Founded in 1978, and putting itself into voluntary administration on 18 January this year, Starleaton's DOCA (deed of company arrangement) only reportedly got over the line on the casting vote of the administrator.

The DOCA was a win for the Eaton family, and for the staff, who should now get all the entitlements, including unpaid super, through the company, although it may take up to two years to get it all. Ben Eaton will be back running the company by the end of the month at the latest.

Unsecured creditors though, who include its suppliers – the hardware and consumables developers – some of whom are owed hundreds of thousands of dollars, will see at most three cents in the dollar, and it may be just one cent.

Print businesses that handed cash over to Starleaton in the weeks and months before it hit the skids, and did not receive the equipment or goods they paid for, face a bleak outcome. Several are already in litigation, fighting for a return of their money, which is reported to top $1m in total. Print businesses from NSW, VIC and QLD are among those hit.

Under the proposed DOCA, Starleaton will be a much slimmer operation. It will close all its warehouses, apart from Sydney, retrench all but six of its 35 staff, and exit hardware supplies entirely, focusing only on consumables. Under the DOCA, stock purchases by Starleaton from now on will be COD, with sales a blend of cash in advance, seven day terms, and 30 day end of month sales.

DOCAs are controversial financial instruments, they effectively enable companies to begin trading again with much of their debt wiped out. Frustrated competitors point out that the DOCA company is operating with having to pay only a fraction of the debts, while they are all paying 100 per cent. Creditors though believe they will get more of a return with a DOCA than if the company goes into liquidation, although in this case as far as unsecured creditors go, not much more, which is why many voted against the DOCA.

The Starleaton DOCA was supported by an $800,000 fund from company founders Peter and Leanne Eaton and from Starleaton Pty Ltd, the entity not in admin. Ben Eaton intends to allocate $33,000 a month for 24 months to get the business running again.

The employees are owed $1.38m. If the DOCA had not been passed they would have got most of it, excluding super, from the government under its Fegs scheme, with the government then trying to claw back as much as possible from the remaining assets, or even the directors themselves. Under the plan and the profits created by the business they will get all of it, although they will have to wait.

Starleaton operated in the sign & display segment, a strong but increasingly competitive market. The two big national printable materials suppliers – Ball & Doggett and Spicers – both of whom are backed by giant Japanese paper conglomerates, have moved into the market in recent years, as commercial papers growth has plateaued at best – and there are also eight or ten strong national wide format consumables suppliers, including the likes of Orafol, Spandex, Avery Dennison, Ricky Richards, HVG, Graphic Art Mart, Amari, Kissel + Wolf, and Smartech, most of whom have significant backing. In addition Currie Group with its massive reach in the commercial world has become a major supplier, and virtually all the hardware developers also sell consumables to their customers.

Starleaton's demise came quickly, the company only moved into new head offices and warehouse in Artarmon, Sydney a year ago. This will now become its sole facility.

Since the company went into liquidation many of the companies Starleaton represented, and owed significant sums to, have signed with new suppliers. Canon Production Print signed with Smartech, Coldenhove and Klieverik are now with Ball & Doggett, while Spicers is now the exclusive supplier of Neschen self-adhesive products, and is also representing Brett Martin media solutions including its Foamalux range. Neschen Laminators are supplied by Stick on Signs. Former Starleaton senior execs John Buitenkamp and Dale Hawkins are now working directly with Klieverik and Zund respectively.