Oroton will be sold to major shareholder Will Vicars in a deal that administrators say will allow it to keep trading.
Collapsed handbag and accessories retailer Oroton will be sold to major shareholder Will Vicars in a deal that administrators say will allow it to keep trading.
Mr Vicars, the co-chief executive of Caledonia Funds Management, holds 18 per cent of Oroton, which was placed in the hands of administrators on November 30.
Under the binding and exclusive agreement Mr Vicars signed late on December 23 with voluntary administrator Vaughan Strawbridge of Deloitte, he will propose a deed of company arrangement that will rescue the business.
No details of the size of the rescue package, or the returns to creditors, have been provided.
Oroton said the agreement would allow the business to avoid a break-up and continue to trade.
‘An important first step’
“Despite interest, there was no other offer that would have resulted in a superior outcome for the business or employees,” Mr Strawbridge said in a statement.
“Our objective has been to avoid a breakup or closure of Oroton, preserve employment and as much of the Oroton business as is viable, whilst achieving a value maximising result for stakeholders.
“Having regard to each of our assessments of the business, the prior sale process and our market testing process, we believe a fully implemented ‘Vicars’ proposal delivers on these objectives.
“Entering into this agreement is an important first step in implementing a recapitalisation of Oroton and we will work hard to complete the proposal.”
The administrators and company will now cease discussions with other parties while Mr Vicars works with Deloitte, the company and its financial advisor Moelis Australia to hammer out a deal.
Mr Vicars was a director of Oroton for 16 years until he resigned in May.
He has already acted as the company’s white knight. In June, Mr Vicars put up $3 million in credit support for the company’s working capital facility with Westpac.
Mr Vicars and the bank subsequently entered into a put and call arrangement, that allowed Westpac to transfer a $20 million working capital facility to Mr Vicars, at face value upon the event of default on in April 2018. The call element enabled Mr Vicars to buy all the Westpac facilities up until May 16, 2018.
It is not clear how Mr Vicars’ buyout proposal effects his arrangement with Westpac, although Deloitte said his proposal would proceed on the basis that Mr Vicars would not “participate in amounts distributed to creditors in respect of its secured debt”.
Oroton, which was backed by Sydney’s Lane family, has struggled in the last five years as it lost market share to international brands such as Coach, Kate Spade, Furla and Michael Kors, and battled to fill a hole in its earnings left when it lost the Australian licence to distribute the Polo Ralph Lauren brand.
An expensive strategy to licence the Gap brand in Australia was a dismal failure. Oroton lost $14 million in 2017 including more than $11 million in associated with the end of its Gap arrangement.
Other interested parties to have run the rule over Oroton are understood to have included Strandbags Group, chaired by Michael Lewis and some offshore groups.
Securing a deal as early as possible in the New Year will be crucial for Oroton and its administrators, as the group will need to buy stock for the following season in late January.