The smartest people in the room have just caused an Australian company thats 140 years old to go broke.
MORE than 1000 people are set to lose their jobs as 140 outlets in the Colorado clothing group close in a major restructure.
The debt-ridden Colorado Group was placed in administration in March after lenders rejected a proposal to allow it to continue trading.
Colorado, which owes about $400 million to a syndicate of 18 financiers, has 434 stores across Australia and New Zealand and 3800 staff.
And where did the owing of $400 million come from to the syndicate of 18 financiers ?
2006 ARH Investments (Australia) Pty Ltd becomes majority shareholder
2007 Colorado de-lists
Who is ARH ?
ARH Holdings (Australia) Pty Ltd is an Australian foreign-owned proprietary company which wholesales and retails footwear and apparel. The company employs over 3,600 people in Australia and New Zealand, and is administrated from its head office in South Brisbane. The company is a wholly-owned subsidiary of Affinity Equity Partners, a Hong Kong-based private equity group.
At the end of March 2011, the company entered voluntary administration when its lenders rejected the company's restructuring proposal. ARH's lenders appointed Ferrier Hodgson as Receiver.
Who are they owned by ?
Affinity Equity Partners is one of the largest dedicated Asian
private equity firms and focuses on
leveraged buyout and
growth capital transactions. Affinity invests primarily in companies that produce consumer-related goods and services as well value-added manufacturing, healthcare, financial services, and business services companies.
Among Affinity's notable investments are the following:
And why did Colorado go broke ?
At the time, Affinity director Brett Sutton argued the unusually aggressive approach in the $430 million deal was needed following four profit downgrades and a massacred share price.
Today, lenders to Colorado, who are owed a total of $440m, are contemplating whether a similar approach is called for once again. In the next 48 hours, the senior lending group, led by National Australia Bank, Mizuho and Rabobank, are expected to make a decision on the future of the company, following the expiry yesterday of an extension on debt covenants.
And there you have it, a company bought with loans that the buyer used the assets of the company they were trying to buy to back it up... All the while exorbitant "fees" would've been paid, by Colorado, to facilitate its own takeover by some private equity vultures.
I can assure everyone that the private equity fund isn't left high and dry by bleeding this company's money.
This is how the people who come from these fancy financial 'service'... more like 'leech' backgrounds think. A successful company is there to make them rich. It will make them rich, it will make the consultants rich, it will make the management involved in the buyout rich.
It's a (somehow) legal form of asset stripping of a public company.
I think the Colorado story is VERY VERY relevant to Qantas. Especially seeing who is 'running' the company.