Administrators to embattled Perth-based company Catalano Seafood (ASX: CSF) have managed to hook a buyer for the business with the recapitalisation plan set to go to a vote by creditors at their second meeting which is scheduled for early next week.
Catalano, which listed on the ASX in February last year, was placed into voluntary administration on 18 October with debts to unsecured creditors of more than $3.1 million.
The company was established in 2019 by the Catalano family as a retailer, processor and distributor of seafood products, although the origins of the family-run business stretch back to 1969.
Through a proposed deed of company arrangement (DOCA) to be put to creditors on 21 November, some unsecured creditors can expect a return of up to 91.8c in the dollar as the proposal seeks to ensure the business continues operating as a going concern.
In their report to creditors, administrators Rob Brauer and Linda Smith of McGrathNicol Restructuring have revealed they received six indicative offers to buy the Catalano Seafood business after advertising it for sale. They say a DOCA proposed by Avior offers the best outcome for creditors.
Under Avior’s proposal, details of which were finalised earlier this week, the company will forward a loan of $1.7 million to pay out secured creditors National Australia Bank (ASX: NAB) and Capital Finance, while also meeting Catalano’s priority debts to employees. Catalano family members who are directors, and their immediate family members, are among those excluded from the priority debt payments to employees.
Unsecured creditors are estimated to receive as much a 91.8c in the dollar, depending on the class of each unsecured creditor. However, some unsecured creditors will receive zero return on their debt.
Should creditors approve the DOCA, Avior will acquire Catalano Seafood as a going concern. It is understood that Avior is looking to retain the Catalano family’s involvement should the DOCA be approved.
Catalano Seafood administrators have recommended creditors accept the DOCA, which needs 50 per cent support from all creditors by number and by the value of debts they are owed.
While creditors have a chance of receiving a dividend, shareholders in the listed company will receive nothing from the transaction as 100 per cent of the company’s shares will be transferred to Avior if creditors approve the DOCA.
Catalano Seafood's woes stem from ambitious expansion plans and a shortage of capital, with the administrators noting the company made ‘substantial’ investments to boost revenue and profitability.
Despite reporting $15.5 million in revenue, Catalano posted a $2.9 million loss in FY23 with the result impacted by higher labour costs, raw materials and overheads.
The company, which supplied to the likes of Metcash (ASX: MTS) and Coles (ASX: COL), was dealt a blow in June after a proposed $2.2 million capital investment by The Pure Meat & Food Co was withdrawn.
Signs of trouble for the business emerged in July when the company was struggling to pay its bills. Payments to 59 per cent of trade creditors were being stretched past due dates and 30 per cent of those pushed out beyond 30 days, according to the creditors' report.
Administrators say the company was likely to have been insolvent from 31 July.
On 21 September, Catalano announced that executive chairman Marcus Liew would provide the company with an on-demand unsecured loan of $200,000. However, voluntary administrators were called in a little over three weeks later.
Catalano Seafood, which raised $5 million from an IPO ahead of its listing early last year, has continued trading under the control of the administrators since they were appointed last month.
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