When it comes to making disclosures to demonstrate independence, possessing intimate knowledge about a corporation’s affairs can create problems, as would seem to be the case following further revelations about the collapse of the All Smiles dental chain.
Acquiring all that knowledge can’t be achieved without a lot of involvement and for those insolvency practitioners registered to take on external administrations that usually means a degree of pre-appointment involvement.
Over the last week public examinations have been run by certain aggrieved All Smiles investors.
Supporting the examinations has been documentation disgorged in response to notices to produce that has revealed more about what was happening behind the scenes in the lead up to the appointment of Deloitte partners Luci Palaghia and Tim Heenan as administrators of Totally Smiles Pty Ltd and Smiles Inclusive Limited on November 11, 2020.
For the Deloitte pair, those goings on indicate that not only were they in the thick of the action as secured creditor NAB grew increasingly alarmed about growing exposure to All Smiles but that their DIRRI, fulsome as it might have seemed when lodged, now appears to be lacking.
In detailing their pre-appointment involvement Palaghia and Heenan refer to an Independent Business Review (IBR) NAB engaged them to undertake on March 26, 2019. That then concluded on May 28, 2019.
Less than five months later on October 15, 2019 the pair were engaged by NAB to undertake a second IBR that they finalised 13 days later.
They then state that: “Since 1 October 2020 we have been providing advice to NAB focussed on developing contingency plans in the event that the Group appointed external administrators, including a range of potential outcomes to NAB and other creditors of the Group”.
Anyone reading the DIRRI would reasonably infer that for 12 months – between October 2019 and October 2020 – neither of the appointees provided advice to All Smiles’ major secured creditor.
But among the myriad documents that have been produced was an email dated March 24, 2020 from Palaghia to Pat Kelly and Mark Tieken, both of whom were at that time senior members of NAB Brisbane’s risk and strategic services teams who have since moved to Westpac.
In that email Palaghia advises the NAB pair on the options available to the bank in respect of the Companies, the business of which was unravelling fast in an environment where the Government-imposed COVID shutdown constituted a veritable death sentence for a cash-strapped dental chain.
Continuing to support the business financially whilst allowing management to continue attempting to turn it around is dismissed and the possibility of the directors appointing administrators is also talked down.
From the tone of the email it’s clear Palaghia considers the appointment of receiver/managers as the best option to preserve value, alluding to the fact that if the exercise became too expensive, NAB can always retire the receivers, “whereas a voluntary administrator cannot be retired”.
“A potential VA by the Company is again not likely to bring maximum benefit for NAB as you will likely be asked to fund the entire process (not just the asset realisation) and the estimated costs are unknown”.
“A Receivership will give you full control over the assets, realisation process and costs,” she concluded.
It certainly reads like advice provided during the pre-appointment period but there’s no reference to any advice being provided between October 2019 and October 2020.
iNO asked Palaghia and Heenan yesterday if the March 24, 2020 advice had been mistakenly omitted or if they did not consider it worthy of inclusion but received no response prior to publication.
Further reading:
Be the first to comment on "Examinations raise questions about All Smiles DIRRI"