Former employees of collapsed fashion retailer Jeanswest are set to receive all of the more than $4 million owed to them, while unsecured creditors may recoup only a fraction of their claims.
The company’s parent, Harbour Guidance, is expected to present a Deed of Company Arrangement (DOCA) at a second creditors’ meeting on Friday.
If approved, the DOCA will allow Jeanswest to exit voluntary administration and return control of operations to its directors.
Under the proposed arrangement, former staff will be paid 100 cents in the dollar, covering unpaid wages, annual leave, long service leave, and other entitlements.
At the time of its collapse in March, Jeanswest employed around 680 people and owed over $4 million in staff entitlements, including nearly $900,000 in annual leave and $624,000 in long service leave.
Harbour Guidance director George Yeung said the company was forced to restructure after poor in-store sales left it with few viable alternatives.
“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,” Yeung said.
The majority of Jeanswest employees remained with the business during an eight-week stock reduction campaign in April and May, helping to clear more than $15 million in inventory. Administrator Lindsay Bainbridge said the results had exceeded expectations and credited the team’s commitment for the outcome.
“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 said.
While employees will be paid in full, external unsecured creditors who are owed about $13 million are likely to receive only 2 cents on the dollar if the DOCA is accepted.
Administrators warned that if the proposal is rejected and the company is liquidated, these creditors may recover nothing.