Starleaton/SDS - liabilities estimated at $29 million, zero return for unsecured creditors

"Liquidation is the only option" says the report. The Administrators of industry supplier Starleaton Holdings/SDS Bidco, Cathro & Partners, have filed their report with ASIC and it makes grim reading. Liabilities are higher than anticipated, and recovery-of-debt prospects for unsecured creditors rated at zero cents-in-the-dollar. Andy McCourt delivers this initial report on the findings.

Understanding the Starleaton corporate structure. Note the NZ company is not in administration

(graphic is © Andrew Blundell of Cathro & Partners)

It is with a very heavy heart indeed that I have to write this article, but it must be reported. 

There was hope, and maybe there still is, of a buyer for the frail skeleton of Starleaton companies. Forty years of successful building up of a fantastic industry supplier, who rarely failed to rise to calls to support industry education, training,, and other initiatives, has been decimated over five or six short years.

The Administrator's esimate of Assets total $4.9 million - and this is optimistic, since much of this is in stock that may be aging. Total estimated liabilities total just over $29 million.

Cathro's recommendation is for Liquidation, adding:

"Our investigations identified that the Companies were likely insolvent from mid-2023, and possibly as far back as April 2021.

• There are transactions and intercompany dealings requiring further investigation, however due to the complexity of the insolvency analysis and the limited timeframe, we have been unable to estimate the value of recoveries at this time.

In the liquidations we would need to:

• Understand the related party dealings, including the related party security.

• Pinpoint the date of insolvency, which is complex given related party support and dealings.

• Determine if there are recoveries available.

• Consider strength of any preference and insolvent trading defences.

• Issue demands for recoveries.

• Commence and conduct proceedings.

The commercial benefits of pursuing will be considered closely on an ongoing basis during a Liquidation."

No DOCA

No DOCA (Deed of Company Arrangement) has been proposed. If Liqudated, the priority creditors are employees and their entitlements. These have blown out to an estimated $1.3 million.

The Administrators' report estimates a return to priority employee creditors of between 0.17 and 100 cents in the dollar. If the companies do liquidate, application for the government FEG programme is possible but this does not include superannuation shortfall which totals $133,396.73 (representing approximately one-annual quarter of missed payments).

Other Priority 1 secured creditors are likely to see 100 cents in the dollar in a liquidation but second-tier secured creditors - zero.

Investigations are on-going by Mr Blundell, as is the potential sale of remaining assets to a party still completing due dilligence.

The second meeting of creditors is on 23rd February via MS teams and all creditors and observers have been issued with login codes.

A final report to ASIC must be lodged ten days following that meeting.

We wish all former employees of Starleaton companies well for the future, they are quality people and many have already found new employment. There is also a vexed matter of Sign & Display printers who have paid deposits or in full for equipment yet to be delivered. We wish them success in gaining either the equipment or a refund but it is a very complex issue, and  we know vested companies are trying their very best to resolve.

Andy McCourt