Attempts to turn around financially troubled brewer Brothers Beer failed, overwhelmed by further deterioration in patronage and a failure by shareholders to front up with all the extra cash promised. In a novel twist, the High Court approved PwC’s appointment as liquidator despite Companies Act prohibitions on any creditor acting as liquidator; PWC is due some $208,000 in unpaid fees following its earlier appointment as Brothers Beer administrator.
Brothers Beer operated a craft brewery in Auckland together with hospitality venues across the city. In August 2023, management took a deep breath and set about restructuring the troubled business.
A Companies Act voluntary administration was imposed, forcing a moratorium on creditor claims followed by a proposal to slim down operations.
Unsecured creditors subsequently agreed to debt payment rescheduling, with forty per cent paid up front; in return shareholders promised to inject further equity capital.
In their report to the High Court, Brothers Beer administrators PwC stated the companies’ later cash position and financial performance proved materially worse than that forecast by directors at time of creditors’ vote.
The upfront forty per cent payment was not paid in full. Shareholders did not put in all the extra cash promised, refusing to contribute further.
This amounted to a ‘material breach’ of the restructuring agreement, PwC said.
PwC described Brothers Beer worsening financial position a result of weaker than anticipated trading, lower than anticipated asset sale recoveries plus suppliers demanding cash upfront for new deliveries which required increased working capital.
With liquidation looming, PwC sought High Court approval for its role to switch from administrator to liquidator.
It is owed $208,000 in fees for work as administrator. Companies Act rules prohibit a creditor from acting as liquidator of an insolvent company. There is a clear conflict of interest.
Justice Whata granted approval for PwC to become liquidator.
Brothers Beer creditors have the option of appointing alternative liquidators at a first creditors meeting scheduled for 24 May. That meeting is only one day after PwC was given clearance to act as liquidator.
re Brothers Beer Holdings Ltd – High Court (23.05.24)
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