Following this week’s first meeting of Grays Group creditors the Group’s voluntary administrators (VA) are this morning heading to court seeking funding approval.
McGrathNicol’s Jason Preston and Damien Pasfield were appointed VAs on October 3 and as their DIRRI discloses, while there was plenty going on pre-appointment it involved McGrathNicol Restructuring first being retained by law firm Stanton & Stanton, which was acting for Grays’ rival and its ultimate purchaser, Slattery Auctions.
Insolvency practitioners being engaged by law firms which act for either appointor directors or related parties or an aspiring acquirer has become standard practice since KordaMentha showed how effective a shield against conflict complaints it can be during the Ten Network Holdings VA back in 2017.
McGrathNicol’s original retainer, for which Stanton & Stanton was billed $8,500 excluding GST, is disclosed as being for the purpose of providing Slattery with courses of action if it proceeded with a buyout of Grays from private equity owner Quadrant and “general advice in relation to the potential acquisition of the Gray’s Group including understanding its corporate structure and financial position in the context of insolvency options”.
During the course of this first phase Slattery asked McGrathNicol Restructuring to plan for a potential appointment as VAs.
Simultaneously Slattery was taking separate advice from McGrathNicol Advisory in respect of “limited scope financial due diligence” in regards to a potential transaction and it was during this period from September 21 to October 2 that Slattery incorporated a new entity – Comserv 2291 Pty Ltd – to hold all the shares of Grays Group.
“McGrathNicol was not involved or engaged to provide any advice to Slattery beyond
current factual matters which therefore would not be related to any matter which would
be subject to review by a future voluntary administrator,” Preston and Pasfield correctly declared.
McGrathNicol billed Slattery $127,177.50 (ex GST) for this engagement, including for out of pocket expenses.
“This fee was not contingent on any outcome in relation to the transaction and it is not payable
by the Grays Group,” Preston and Pasfield declared.
Their DIRRI also records that whilst no indemnity has been provided the VAs “have been
offered a finance facility in the amount of $4m which may be used for costs and expenses of the administration”.
Expect the court to approve the Section 447A application this morning.
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