Sydney-based Allegro Funds placed the companies behind the Harris Scarfe department store chain under voluntary administration last month, nine days after the private equity firm acquired them from Greenlit, the Asia-Pacific subsidiary of South African furniture behemoth Steinhoff International.

Minutes of the first meeting of creditors, published on the ASIC website this week, reveal that the nine companies behind Harris Scarfe collectively owe unsecured creditors about $98 million.

But trade suppliers and landlords won’t see a dollar until and unless Allegro Funds is paid first: the firm is a secured creditor, owed approximately $70 million.

According to the minutes of the meeting, administrators BDO believed 30 Harris Scarfe stores were “unprofitable”.

Earlier this week, receivers Deloitte confirmed that Harris Scarfe’s Rundle Mall store will close within four weeks after 170 years of trading – among the 21 stores due for closure around the country.

The Rundle Mall store has 69 employees, including 13 full-time staff, 21 part-time and 35 casuals.

No other South Australian store was said to be in line to shut.

Harris Scarfe was founded in Adelaide in 1849, and currently employs around 1800 staff across more than 60 stores nationally.

During the December 20 meeting, creditors asked BDO to explain the transaction.

The administrators said Australian Retail Holdco, led by Allegro managing director Fay Bou, had acquired the debt as part of the transaction in which it bought the Harris Scarfe companies, as part of a package that also saw the firm acquire the Best & Less and Postie chains.

“The entity (Australian Retail Holdco) acquired the secured debt of the previous secured debt holder as part of the acquisition of the business,” the administrators are recorded as saying during a question and answer session at the meeting.

“Further investigations in respect of the transaction are required and will be undertaken in the administration.”

Deloitte Australia, the receivers trading Harris Scarfe while it is under administration, told InDaily the debt “was purchased before Allegro bought the business, as part of the acquisition”.

Creditors also asked during the meeting how it was possible for Allegro to conduct due diligence on Harris Scarfe, buy it, then place it under administration shortly after.

“On what basis is it possible that a purchaser undertakes due diligence, completes the acquisition of a business and then appoints administrators shortly after?” a question from a creditor recorded in the minutes reads.

“The sale transaction and events leading up to the appointment of the administrators will be investigated and findings included in our detailed second report to creditors,” responded the administrators.

“The companies were placed into administration as the sole director (Allegro Funds operating partner Brad Leahy) formed the view that the companies were insolvent or likely to become insolvent.”

Creditors also asked whether there would be any investigation of potential criminal activity.

“The administrators will investigate potential criminal breaches as part of their investigations,” is the recorded response. There is no indication of the nature of the activity that may be the subject of investigation.

Administrator Duncan Clubb told InDaily this morning that “if there has been breaches we will investigate them, but that’s not to say that there have been breaches”.

According to the minutes of the meeting, administrators believed 30 Harris Scarfe stores were “unprofitable”.

Asked whether Allegro had expressed interest in buying the companies back, a Deloitte spokesperson told InDaily: “The receivers’ role is to trade the business and find a new buyer via a public sale process.”

“They expect to achieve a sale to a new owner and achieving the best possible price in the interests of all creditors.”

InDaily contacted Allegro today for comment.

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