Colorado Group on the skids

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This was published 13 years ago

Colorado Group on the skids

By Ben Butler

A $396 MILLION mountain of debt, the lacklustre performance of its flagship chain and Australia's grim retail landscape have smashed Colorado Group.

The venerable retailer's private equity owners pulled the plug on the company yesterday, putting it into administration after its financiers knocked back a restructuring proposal.

Colorado... in deep trouble.

Colorado... in deep trouble.

Administration was quickly followed by receivership at the hands of 18 banks and hedge funds owed $396 million.

Receiver James Stewart, of Ferrier Hodgson, who has charge of Colorado's assets on behalf of its financiers, told BusinessDay the group was up for sale either as a whole or piece by piece.

In addition to the Colorado brand, the group owns Mathers, Williams, JAG and Diana Ferrari.

Previously it had been reported that Ferrier Hodgson believed the group's assets could fetch up to $130 million in receivership, but Mr Stewart declined to be drawn on how much he hoped to reap.

Retail kingpin Solomon Lew, whose listed vehicle Premier Investments is sitting on a $300 million war chest, last week confirmed he was interested in buying all or part of Colorado.

But Mr Stewart said he hoped more than one potential buyer would emerge.

He said Ferrier Hodgson would run a sale process lasting between three and five months to get the best possible price.

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Sources say Colorado, the group's flagship brand and the source of its weakness, had strayed too far from its roots as a footwear line, becoming instead a general clothing market.

While Mr Stewart refused to rule out closing some of the group's 188 Colorado-branded stores, he said the brand had value.

''People may not buy from it, but it's very well-known,'' he said.

Colorado's owners Affinity Equity Partners decided to call in Deloitte as voluntary administrators after the group's financiers rejected a proposal that would have resulted in lenders take ahaircut on the debt in return for 75 per cent of the company.

In a statement, the Colorado board said it was ''disappointed'' bankers had rejected two restructuring proposals. ''It remains the firm view of the board that this alternate course of action would have better served the interests of all the company's lenders, the business and its brands, the company's employees and external stakeholders, including suppliers and landlords.''

It said Colorado had been operating in ''a difficult retail environment for some time'', especially over the crucial Christmas sales period.

The anger company directors expressed at Colorado's financiers yesterday contrasts with the optimistic picture the board painted last year. When the board met in June, at the tail end of a shocking year for the retailer that saw it lose $70.7 million, they decided things were going to get better.

Directors predicted a 40 per cent surge in earnings in 2011, betting on a turnaround in the group's performance.

Over the months that followed, directors progressively downgraded their forecast of $53.9 million until by late January they were predicting earnings of just $18.6 million.

Affinity Equity Partners bought Colorado Group at the peak of the market in November 2006, loading the company with debt just as the global economy turned sour.

The appointment of administrators and receivers looks set to wipe out the $135 million Affinity has invested in the business.

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Ferrier Hodgson has previously estimated a fire sale of Colorado's assets would fetch up to $130 million - not enough to satisfy the debt owed to the banks, let alone provide a return to Affinity. Trade creditors, owed $27 million, are in line behind the banks and staff, owed $7 million.

A creditors' meeting will be called within eight business days.

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