Collection House (ASX: CLH) is in the hole for nearly $20 million to creditors, with Westpac Banking Corporation (ASX: WBC) facing the biggest exposure to the debt collector as voluntary administrators work towards cutting costs for a potential sale of the business.
The first meeting of creditors on Monday afternoon (11 July 2022) was told that that secured creditor Westpac is owed $10.85 million, followed by Commonwealth Bank of Australia (ASX: CBA) with a debt of $1.97 million.
A further 95 unsecured creditors are owed a total of $5.63 million, in addition to $1 million in debts on the personal property securities register.
Westpac has provided interim funding for the company which was placed in the hands of voluntary administrators John Park, Ben Campbell and Kelly-Anne Trenfield, of FTI Consulting, in June.
Creditors were told that the administrators are seeking expressions of interests to either sell the Collection House business or recapitalise the company.
While the business continues to operate, the administrators have been scaling back costs by focusing on eight existing property leases, including seeking rent relief and short-term arrangements from existing landlords.
The administrators have already given notice that they will not renew leases on offices at Australia Square and Oxford Street in Sydney, and at Pirie Street in Adelaide.
The company’s Skyring Terrace headquarters in the inner-Brisbane suburb of Newstead accounts for 75 per cent of Collection House’s lease costs. Administrators have negotiated an ‘alternate agreement’ with landlord Growthpoint Properties Australia (ASX: GOZ).
Collection House operates from locations in Queensland, NSW and Victoria with its core business being debt collection through contracts with banks, financiers and buy-now-pay-later businesses.
The company has been struggling to gain momentum following the impact of the pandemic on its debt collection activities and was placed into administration following two failed attempts at recapitalising the company.
An announcement by Collection House to the ASX last Friday revealed that the administrators have started a process to secure a buyer for the business and/or another recapitalisation plan for the listed corporate entity. Final offers are being sought by 22 July 2022.
The most promising offer will be put to creditors on 26 July, with the proposal going to a vote on 3 August at the second creditors’ meeting.
The administrators are also finalising costs associated with employee entitlements, with Collection House’s 460 employees owed about $3.26 million in leave entitlements and about $699,000 in superannuation.
The voluntary administrators have declined to comment further on their progress. The options for creditors remain that they vote for Collections House to be wound up or to operate via a deed of company arrangement.
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