Penrice Soda Products Pty Ltd (PSP) was insolvent for six months before it went into administration, says a preliminary report into the company.
Penrice went into administration on April 11 this year with an estimated $200 million in debt.
A report to creditors by administrator McGrathNicol shows 180 employees will have to apply for government assistance as Penrice is unable to meet $4.5 million in wages, leave entitlements and redundancy payments.
The report, dated July 23, recommends the company be wound up. It estimates unsecured creditors will get nothing and that two major banks will be left with a significant shortfall from their $111.5 million loans to the group.
It says it will investigate payments made to some creditors in the six-month period prior to its appointment to determine whether “parties knew or had reason to suspect” that PSP was insolvent when payments were made.
“As no Deed of Company Arrangement has been put forward to the Administrators and the companies are insolvent and without immediate cash resources … the Administrators are of the opinion that it is in the interests of creditors that the companies be wound up.
“National Australia Bank (NAB) and Westpac (WBC) have combined debt of circa $111.5m,” it states.
“Proceeds from the sale of Penrice group’s physical assets will not discharge this debt, resulting in significant shortfall to NAB and WBC.
“Any return to unsecured creditors is wholly dependent on recoveries from a successful insolvent trading action against the directors and unfair preference recoveries.”
Creditors meet tomorrow (July 31) in Adelaide to vote on the recommendations, including to what extent they should pursue former directors and payments made to other creditors in the period of insolvency.
The administrator warns: “Prior to commencing any proceedings, investigations will need to be completed by a liquidator and those investigations will incur significant costs.
“It will take at least two years before a judgment is obtained. In addition, there are significant risks in pursuing litigation.”
The hardest pill to swallow will be for the employees.
The report makes it clear there are insufficient net assets to meet the claim for employee entitlements on liquidation.
This means employees will have to lodge a claim with the Australian Government’s Fair Entitlements Guarantee (FEG), subject to caps and excluding superannuation.
The only asset to realise significant funds was the sale of a limestone quarry at Angaston to Adelaide Brighton Cement.
InDaily understands the sale figure was around $20 million – barely enough to make a dent in the debts.
That sale will be finalised today.
The sale will see the quarry transferred to Adelaide Brighton on a going-concern basis, protecting an estimated 60 jobs in the Barossa town of Angaston.
The second creditors’ meeting tomorrow is expected to ring the final bell on the embattled company.
It hasn’t made a profit for years.
It owned an ageing processing plant at Osborne, one of the oldest chemicals manufacturing sites in the state, on the edge of the Port River.
Penrice had been manufacturing chemicals at the Osborne site since the mid-1930s, originally under the name of its first owner ICI. It was carved off and re-badged as Penrice in 2008.
Investors have done their dough and creditors include transport companies, utilities and personal service suppliers.
Scott’s Transport Industries says it is owed $1.43 million, energy distributor Envestra put in a claim for $56,100 and Momentum Energy for $648,000.
Ridley Corporation, which owns the salt pans that had been an essential component of soda ash manufacturing before Penrice closed down that part of its business, says its losses from frustrated contracts will amount to more than $27 million.
At the time of its collapse into administration, the directors of the parent company, Penrice Soda Holdings, were: David Trebeck (chairman) Guy Roberts (managing director, CEO), Andrew Fletcher (non-executive director) and Rob Webb (CFO).