Former employees of failed fashion retailer Jeanswest will receive 100 per cent of the more than $4 million they were owed, but the company’s unsecured creditors will only be paid 2 per cent.
A Deed of Company Arrangement (DOCA) was presented by Jeanswest’s parent company, Harbour Guidance, to creditors at a meeting on June 27, which was accepted. The firm entered voluntary administration in March and appointed Pitcher Partners Melbourne as administrator.
The DOCA sees the company exit the administration process, and the directors will now resume control of its operations.
The DOCA will see former Jeanswest staff receive 100 cents in the dollar, including owed annual leave, long service leave and other entitlements.
At the time of its collapse, the chain had approximately 680 employees and owed wage entitlements of over $4 million, almost $900,000 in annual leave and $624,000 in long service leave.
The company said most of these employees stayed on and helped shift more than $15 million in inventory during the eight-week sales campaign in April and May.
Meanwhile, external unsecured creditors, who were owed about $13 million, will only receive 2 cents for every dollar owed.
“We regret having to pursue this course of action, but we were left with very few options but to restructure as sales in our stores were below expectations,” said George Yeung, director of Harbour Guidance.
“When we are out of administration, we will begin work on a new business model and the next chapter for Jeanswest,” he continued.
Administrator Lindsay Bainbridge noted that results of the stock reduction sales campaign exceeded all expectations and that the team’s composure and commitment were the key drivers of that performance.
Inventory specialists Gordon Brothers also played a key role in the inventory sell-down.
“We were asked to consider a number of strategies but ultimately the administrators went with our preferred model of selling-down the company’s stock through the stores to avoid a fire sale, and we were delighted with this strong result,” said Luke Johnston, a director in Gordon Brothers’ Client Coverage and Origination division.
In its analysis of Jeanswest’s financial difficulties, Pitcher Partners noted that the company’s business model was heavily reliant on its 87 retail stores nationwide.
“Many stores were underperforming, and with the weak retail environment across Australia and consumers not spending in the stores, there was little prospect of recovery while retaining the current operating model,” Bainbridge commented.
