Tag: Surfstitch

A party previously involved with Surfstitch has submitted a draft bid to restructure the company, which would see it re-list on the ASX, pending support from a creditor vote in coming months.

Administrators FTI Consulting, appointed last week, notified creditors of the proposal at a meeting in Sydney on Tuesday morning, but FTI senior MD John Park declined to say what the response was, other than that the meeting was “quick” and “calm”.

Park would not confirm whether major shareholder and co-founder Justin Cameron was behind the proposal, but said Cameron did not attend the creditor meeting.

“I’ve received one draft deed of company proposal this morning,” Park said. “It’s a proposal to see…a relisting of the vehicle.”

Creditors include management, advisors and the shareholders associated with the Quinn Emanuel Urquhart & Sullivan and Gadens shareholder class actions, as well as Crown Financial’s Kim Sundell, who also has pending legal action against the company.

FTI expects to receive more restructure proposals for the company over the next 30-50 days before its due to deliver its report and recommendation to creditors about the future of the business.

Liquidation is still a possibility, although not something that Park believes will deliver an optimal outcome for stakeholders.

“My experience is that creditors look upon a deed of company arrangement a lot more favourably than a liquidation scenario,” he said.

“[Litigators will] be looking for a palatable commercial outcome.”

The administration was undertaken to put a stay on the legal proceedings. Park said a restructure would be the only outcome that would generate a return for shareholders.

“[Litigaton funders] have indicated that they are receptive to looking at some form of restructuring proposal which takes into account their interests and they will assess it on its merits and make a decision,” Park told journalists on Tuesday afternoon.

Park could not quantify what the company owed to creditors, citing the inability to determine the value of the pending legal action.

Quinn Emanuel filed a $100 million class action on behalf of shareholders against SurfStitch in May and was in the process of negotiating a settlement with the company when it entered voluntary administration two weeks ago.

Quinn Emanuel partner Damian Scattini has previously declined to say what size settlement would be acceptable to shareholders, at the time citing ongoing negotiations.

Meanwhile, Gadens did not place a specific value on the claim it filed in June, other than to say it would be a “large” claim.

“It’s a bit pointless to pluck figures out of the air. It all depends on how loss is to be calculated. What’s more, we don’t know the full spread of members of the class in order to make that calculation,” Gadens’ Melbourne-based partner, Glenn McGowan, QC, told IR last week.

McGowan said he has not been contacted by administrators, except for a standard form letter to prove the claimed debt.

“I imagine they have spoken to the [litigation] funders. But they [the administrators] will have to speak to the lawyers in each proceeding if any agreement is to be reached,” he told IR on Tuesday.

However, he has previously said he is pessimistic about shareholders’ chances of recouping losses from Surfstitch. That is why Gadens in June also filed a class action against Cameron, who, like many CEOs, holds an insurance policy.

Surfstitch’s operating subsidiaries continue to trade while the holding company is in administration, Park said there was initial concern from suppliers but that they’d been “pleased” with internal stakeholder response so far.

Struggling surfwear chain, Surfstitch Group, has today entered administration after appointing John Park, Quentin Olde and Joseph Hansell of FTI Consulting effective immediately.

The retailer’s online companies, SurfStitch (Aus), SurfDome (UK) and Swell (US), and publishing businesses MagicSeaweed (UK) and Stab (Aus & US) will continue to trade while the administration process takes place.

Sam Weiss, chairman of Surfstitch, said that the companies “reluctantly made the appointments due to several significant external challenges including two Class Actions, protracted litigation and an ASIC investigation which have brought high levels of uncertainty impacting the companies’ trading position.”

“The administrators have been appointed with the intention of preserving value for stakeholders in the business whilst recapitalisation options are pursued.”

John Park, leader Australia, corporate finance & restructuring of FTI Consulting, said the administrators will work closely with the operating businesses to preserve value for stakeholders.

Sam Weiss, chairman of struggling surfwear retailer, Surfstitch, has survived a shareholder’s attempt to remove him from the post.

Crown Financial, which has a more than a five per cent stake in Surfstitch, had sent the company a notice of requisition to hold the shareholder meeting, after taking legal action against Surfstitch related to a fallout over a content sharing deal, and wanted Weiss removed as a director of Surfstitch.

The board backed Weiss and earlier urged shareholders to vote against the proposal, which the majority did, with 91.78 per cent of the votes cast in favour of keeping the chairman.

Surfstich says it is exploring the option of selling media assets and other asset sales as it faces litigation from Crown Financial group, separate class actions in the Queensland and NSW supreme courts and a continuing ASIC investigation – all of which are expected to impact its cash position.

“I have been involved in the retail trade for the past forty years and have experience in it in Europe, the United States and Asia and have been actively engaged in e-commerce virtually since the beginning of it nearly twenty years ago,” Weiss said prior to the vote.

“I was under no illusions about the degree of difficulty of the task ahead, nor was I when I commenced my appointment with the company.”

Surfstitch went into a trading halt in late May after shareholders launched a potential $100 million class action.

The action launched by law firm Quinn Emanuel in Queensland’s Supreme Court accuses Surfstitch of making misleading statements and forecasts of its 2015/16 earnings.

The company last traded at 6.8 cents a share, significantly lower than its peak of $1.90 a share in December 2015, and is expected to resume trade when it reports its full-year results in August.