Australian electronics chain Dick Smith is going into voluntary administration.
The company said this morning that had failed to secure support from its banking syndicate to remain in operation after disappointing sales in December.
Dick Smith Holdings shares were put in a trading halt pending an announcement around its “funding position and debt financing covenants” yesterday.
Today the company has been de-listed from the ASX.
Dick Smith’s bankers, NAB and HSBC have appointed Ferrier Hodgson as receiver. McGrathNicol will be the company’s administrator.
Chairman Rob Murray said that recent sales had not generated as much money as management had hoped.
“The directors formed the view that any success in obtaining alternative funding would not have been sufficiently timely to support short-term funding requirements and allow the company to order required inventory during the next four to six weeks.”
“The directors have been unsuccessful in obtaining the necessary support of its banking syndicate to see it through this period.”
Joe Hayes, one of the administrators for McGrathNicol said in a statement that the first statutory meeting of creditors will take place next Thursday 14 January.
Receivers Ferrier Hodgson have said that stores will remain open for now, and employees will continue to be paid.
However customers who were hoping to spend their Christmas gift vouchers at the store are out of luck, with the firm saying that outstanding gift vouchers will not be honoured.
The search is now on for a new buyer for the troubled company, with Ferrier Hodgson confirming they are immediately calling for expressions of interest around the sale of Dick Smith.
Trouble really began to hit Dick Smith in November last year when the company slashed its inventory value by 20% and focused on recovering debt.
Stocks plunged at the time by nearly 70% at one point and pushed the value of the company to less than it was worth before Anchorage capital bought the chain of Woolworths for just $94 million.
The company then opened up for what was essentially a fire sale, offering some private-label products for a discount of up to 97.5%. While the sale was meant to drive strong sales across the Christmas period, stores had a serious lack of inventory. This pushed customers away even more, with no viable options to replenish stock due to Dick Smith not wanting to take on more debt.
If that wasn’t bad enough enough for the struggling retailer, suppliers in recent weeks have allegedly become worried about getting paid and some have even begun demanding cash on delivery.
The retailer’s shares last traded at 35.5c — 83 per cent lower than its debut price of $2.20 when Anchorage floated it on the Australian Securities Exchange in December 2013.
As it stands, Dick Smith’s current largest investor is Macquarie Investment Management LTD, US based FIL Limited and Ausbil Investment Management Limited.