Wednesday 26 October 2016 03:53 PM
UPDATE: Pumpkin Patch appoints administrators as sales fall
(Adds receiver comment from 5th paragraph)
By Paul McBeth
Oct. 26 (BusinessDesk) - Children's clothing retailer Pumpkin Patch has been tipped into receivership by its lenders and appointed voluntary administrators after failing to reinvent itself in the face of shrinking sales and too much debt.
Auckland-based Pumpkin Patch's board appointed McGrathNicol's Andrew Grenfell and Conor McElhinney as administrators and said it understood KordaMentha's Neale Jackson and Brendon Gibson had been named receivers. Last week the retailer said there was virtually no value left in its equity after talks with its lender ANZ Bank New Zealand fell through.
"Despite considerable efforts by the board and its management team, it has become evident that no solution is available to the company, at this time, to address the current over-leveraged and significantly capital constrained position," chairman Peter Schuyt and managing director Luke Bunt said in a statement. "With no likely solution available, the board believes that the constraints currently experienced by the business are too great and the only appropriate action to best protect the interests of stakeholders is to appoint administrators."
In its full-year results published last month, Pumpkin Patch told investors its directors had given an undertaking to the bank that it would put forward proposals by Oct. 20, which was later pushed out to Oct. 31. The capital constraints were highlighted in the accounts as a "material risk" to the ongoing viability of the business. Pumpkin Patch's debt to ANZ Bank rose to $46 million from $39.1 million in the year to the end of July 2016. It posted a loss of $15.5 million in the same period.
KordaMentha's Gibson told a briefing in Auckland that the retailer's 43 stores in New Zealand and 117 sites in Australia will continue to operate as they try to sell the business as a going concern. However, he indicated Pumpkin Patch's existing plans to shut down some outlets would be accelerated "in an effort to improve saleability and viability" which would likely lead to job losses amongst the 600 New Zealand staff and 1,000 Australian employees.
"We're working through a process where those people that have expressed interest we'll be contacting immediately and I expect from the announcement we'll have people contacting us," he said. "It's about the medium- to long-term future and people will take different views on that. so I'm not saying it will be an easy process but it's something we'll be trying very diligently to try and optimise the return to the creditors."
Gibson said the receivers will assess that interest in the next seven-to-10 days before assessing what will happen next.
"I'm not suggesting that it necessarily needs to be a short timeframe but we need to make some assessments as we go through the process," he said.
Last year Pumpkin Patch spurned a number of parties interested in buying the business, saying at the time that they offers weren't compelling enough for the board to consider seriously. Instead, the retailer tried to lift its trading performance in a four-year turnaround programme, which it claimed was starting to show improvements.
The retailer's board today said it was committed to working with the administrators and receivers to get "the best possible outcome for the company and staff".
The shares have been suspended, having last traded at 6 cents, valuing the retailer at $10.1 million.