Pie Face administrators: We received no “bona fide” offer to buy the company

The former administrators of retail franchise Pie Face have hit back at calls for an inquiry into their management of the voluntary administration process, claiming they did not receive one “bona fide” offer to purchase the company that was on par with the outcome delivered to creditors from the Deed of Company Arrangement (DOCA) in December.

Pie Face emerged from voluntary administration late last month after creditors voted to support a DOCA to avoid liquidation. The chain will now be headed up by former director Andrew Thomson as chairman, with co-founder Wayne Homschek to remain on the board.

Twenty Pie Face outlets closed during the administration, affecting 130 part-time employees and reducing the chain’s store footprint to approximately 50 stores.

But Stan Gordon, chief executive of the Franchised Food Company, claimed yesterday the administration process was “disgraceful”.

Gordon said the administration process was “not all it seems” and described the information memorandum he received about the business as “atrocious”.

Gordon had previously put his hand up to buy the Pie Face chain but told SmartCompany in November his calls to administrators Jirsch Sutherland went unanswered.

He said this week he was contacted by several Pie Face franchisees once his bid for the company was made public and now believes there should be an inquiry into how the administration was managed.

“Questions must be raised about the process and the administrator,” Gordon said.

But Jirsch Sutherland managing director Sule Arnautovic told SmartCompany the administrators only received one offer for part of the Pie Face Group but the offer was not “remotely close” to the proposed returns of the DOCA.

Arnautovic says the offer “was not adequately quantified”, did not address employee entitlements amounting to around $3.5 million under the DOCA, or the secured debt of creditor TCA Global Fund Management and other convertible note-holders. Outside of the DOCA, arrangements have been made to pay around $2.2 million to TCA Global and around $7.3 million to other convertible note-holders.

The offer also did not offer any returns to statutory or trade creditors and did not address the administrators’ trading costs and liabilities, says Arnautovic.

“The offer party basically only received our information memorandum, which was only a summary of the proposed sale transaction,” he says.

“They never made any subsequent appointments with the administrators or the Pie Face management team to conduct further due diligence, which would be necessary to effect a sale of business.”

Arnautovic says approximately $7.5 million is earmarked for the DOCA funds for the companies in the Pie Face Group, which includes around $2.8 million upfront in cash and trading receipts and around $4.7 million over three year from future trading.

Of the funds, unsecured creditors of Pie Face Holdings are expected to receive between 16-18 cents in the dollar over an eight month period. Unsecured creditors of Pie Face Franchising will receive between 14-17 in the dollar over a three month period, while unsecured creditors of Pie Face Pty Ltd can expect between 14-19 cents in the dollar over a three year period.

Employee entitlements for all three companies will be paid in full, while secured creditors of the companies will receive $9.5 million, to be paid outside of the DOCA arrangements.

In comparison, Arnautovic says the offer party would have had to have paid “north of $15 million” for the period between November 21 and December 30 “to be remotely competitive”.

“The offer party was nowhere near this amount if one could actually quantify their offer,” he says.

“The administrators are disappointed with the offer party, who appears to have breached their non-disclosure agreements, reading recent press reports, with the Pie Face companies.”

Speaking to SmartCompany today, Gordon disputed claims that Jirsch Sutherland only received one offer for the Pie Face business. 

Gordon says, based on correspondence with the administrators, he was under the impression they had received multiple offers for the business. He added that he was given just days over the Christmas break to make his offer based on limited information about companies in the Pie Face Group.