How do the banks work with the administrator in the voluntary administration of a company like Kikki.K? Kikki.k was a designer stationery empire founded by Kristina Karlsson and Paul Lacy. Other investors were the wealthy Myer family, James McKay an executive of James Packer who runs all of Packers consumer investments and Iain Nain who was the former boss of David Jones and Country Road. Kikki.k was 15% owned by the investment arm of KordaMentha.
According to media reports Nairn went on an aggressive spending spree and then the company was put in voluntary administration by the three main creditors Commonwealth Bank, KordaMentha and TDM whose former UBS investment banker Julian Reddick was on the Board of Kikki.k. KordaMentha were sensible enough to choose another administrator to take over the administration process. There was a buyer lined up for the company - a Chinese buyer. KordaMentha’s advisory arm 333 Capital presented an International Roadshow to dozens of investors in 2016 to raise capital for Kikki.k. That money was all lost to shareholders.
Kikki.k is a good business and it will continue on. It was not listed on the stock exchange.
The Commonwealth Bank was the lender to the collapsed Kikki.k. The Commonwealth Bank was also the lender to the collapsed TV chef Calombaris’s company Made Establishment and they also then chose KordaMentha to be the administrator. KordaMentha was also the administrator to the collapsed Jamie Oliver restaurant chain. The Commonwealth Bank is the lender to many of the ASX companies that go into voluntary administration. When an ASX listed company goes into administration and KordaMentha takes over, shareholders lose everything. Not a single case have I heard where KordaMentha returns the company to shareholders or pays out shareholders with left over money after all the creditors have been paid. Many of these companies are targets of short sellers prior to administration.
KordaMentha famously took $1 million a week in fees when Arrium went into administration and was put in their care.
KordaMentha is or has been the administrator for the following companies
Ansett, Ten Network, Bounty Mining, Alita Resources, SKM recycling, Australian Abrasive Minerals, Bluesky, Carnegie Wave Energy, Tigerlily, CBL corporation, Aussie Farmers Direct, Stellar Group, Roger David, Griffin Coal, Gunns, Timbercorp, Tassal,
The Commonwealth Bank’s broker arm Commsec lends out its margin loan clients shares to short sellers. Commsec charges its customers brokerage whenever short sellers using algorithm programs to sell us mums and dads only 1 share. Commsec bans mums and dads from trades under $500 despite it being allowed by the ASX and ASIC. Despite algorithmic traders doing manipulative trades of 1 share constantly to force prices down, Commec often calls up its own clients the mum and dad investors to tell them off for manipulative trading when they place their minimum $500 orders if that trade pushes the share price up.
I have known many mum and dad investors who have been unable to place trades of around $1000 that were deemed ‘manipulative’ by Commsec because they caused an uptick in the price, despite Commsec allowing manipulative downtick trading all day by short sellers and algo traders and Commsec’s investment arm engaging in illegal manipulative trading themselves.
Much of this illegal manipulative trading is done by Commsec’s trading arm to force share prices down and force them into administration. If the appointment of an administrator is a default condition of the loan, Commonwealth Bank then appoint KordMentha as administrator. KordaMentha pays them out first as preferred creditor.
Such is the relationship between bank and administrator.
KordaMentha also have a special relationship with ASIC. When KordaMentha need to, they are able to apply for and receive special waivers from their reporting obligations. These include financial reporting while the company is in Voluntary Administration and final sale prices of the assets. Shareholders believe that the reason for these waivers is so that shareholders don’t know the real state of affairs. If there is an improvement in the business and the real state of affairs are revealed then shareholders might demand the company trade out of trouble and back in the hands of shareholders.
Shareholders also believe that the reason for not declaring the final sale price is that sales often go to preferred parties rather than the highest bidder. By selling to the preferred party the deal can be arranged where the cheapest price is given which allows the banks to get paid out but not a cent leftover to pay out other creditors and shareholders. This is a win win for the banks, KordaMentha and the new owner but everybody else loses including small businesses who are owed money.
Leon Zwier is often KordaMentha's "legal architect" who ensures the big lenders are looked after to the detriment of other creditors including shareholders.
He has been at it since 2003 positioning and lobbying for larger liquidators to have greater control.
Initially there was The Sons of Gwalia High Court decision, that ranked shareholders as equal. Leon Zwier successfully lobbied the Howard Government to change the Corporations Act to override the decision and as a result the rights of shareholders.
In his submission to CAMAC, Leon Zwier suggests an amendment to the Corporations Act limiting shareholder claims in a formal insolvency to a notional sum of $1.
Alan Kohler wrote an article about it in 2008.
https://www.eurekareport.com.au/investment-news/ghosts-of-gwalia/72877
In 2015 Mr Zwier represented Labor Leader Bill Shorten pro bono in the 2015 trade union royal commission.
It is an ASX shareholders worst nightmare to see their company in discussions with KordaMentha. Sometimes a journalist will even play on it. A few weeks ago the AFR journalist Sue Mitchell tweeted that one company was in discussions with KordaMentha. The share price fell 44% in one day after that. It was baseless. That tweet has since been deleted. Three days ago Bridget Carter from the Australian said
"The understanding is that the department store chain has been engaging with insolvency firm Korda Mentha to address its financial challenges, although this is believed to be in the form of seeking assistance with leases and loans rather than working on any move to place the company into voluntary administration"
My question is where does she get her understanding from? Did she get a call from the Myer Board telling her that or did KordaMentha call her?
At this time of Covid-19 the fear is that banks and administrators are positioning themselves very well to exploit this economic malaise while pretending to be some form of white knight.
There is a very real concern that many companies going through temporary financial problems as a result of Covid-19 will be forced into administration from the banks and for shareholders the worst thing is if they end up in the hands of KordaMentha.
If the Covid-19 situation then improves it will be too late especially if KordaMentha applies to ASIC for waivers on financial reporting.
This is what happened to Arrium. After Arrium was put into voluntary administration the iron ore price surged. A year later Arrium was worth more than what it was a year before it went into administration. But with the ASIC waivers shareholders had nothing to prove that it should be returned to shareholders.
Contact : devinechanges2018