Small Business Restructure (Tourism)

INDUSTRY:                                                          Tourism

COMPANY SIZE:                                                13 Employees

DEBT:                                                                   $872, 471

PLAN OF ACTION:                                             Small Business Restructure Plan

Background

The Company operates a fishing lodge in NT.

Prior to the onset of COVID-19, the Company operated profitably and met obligations as and when they fell due.

As a result of COVID-19, on 23 March 2020, the owners made the decision to shut the lodge down to protect the local families and the staff from COVID-19.

During the pandemic, the business took steps to apply for Government grants. During this process they identified various improvements they could make on running their business and monitoring its financial performance.

Unfortunately, the business accrued a large ATO debt and did not have the available cashflow to pay debts. The Directors received a Director penalty notice from the ATO and had to act quickly to try and save their business.

Rapsey Griffiths was called upon to review the company’s situation and determine the most appropriate response to its circumstances.

“The situation was challenging, and we were able to work in collaboration with the business owners and develop a turnaround and rescue plan for the business.”

Chad Rapsey (Co-founder / Director) 

Core problem

Time was running out and a quick turnaround strategy was needed.

The ATO had issued a Director penalty notice and the Directors had less than two weeks before this notice expired.

A shutdown of the business would result in the loss of the family business, the cessation of trading, termination of the employment of 13 staff, customers losing their deposits for trips booked and expose the creditors to significant uncertainty and in all likelihood, a poor return.

Controls are now in place regarding the books and records and lodgement of BAS and will be able to be maintained moving forward.

Over the past 12 months, trip bookings and attendances have returned to normal, deferred trips have now been completed and the forward bookings into 2023 are strong, with bookings and revenues now returned and forecast to remain at or exceed to pre-pandemic levels.

Following a review of the financial viability of the business and potential operation improvements, Rapsey Griffiths determined that a small business restructuring plan was the best solution that would protect value and offer a better outcome for all stakeholders.

The solution – finding a way forward

The major benefits of the SBR were;

• The Directors stay in control of the process and are assisted by the SBR Practitioner.
• The Company continues to trade under the Directors’ control during the process.
• The SBR Practitioner works for the Company to help save the business.
• The SBR Practitioner charged a fixed fee restructuring period.
• Entering into a restructuring plan allowed the Directors to avoid personal liability from the Director penalty notice.

We worked in collaboration with management, staff, secured creditors, customers and suppliers and we supported the business through the Small Business Restructuring process.

The outcome – a return to order

The Company proposed a restructuring plan which provides for:

• 24 monthly contributions that are expected to be sourced from trading profits of the Company.
• An estimated dividend to unsecured creditors of 17.06 cents in the dollar.
• Dividends are to be paid to creditors every six (6) months during the plan.

We continued to engage with stakeholders throughout the process and the restructuring proposal was approved.

The business was saved. The Directors and shareholders were thrilled with the outcome and their stress levels were reduced. Employees kept their jobs. Customers were happy and creditors were supportive of the situation. A great outcome.

The numbers

Immediate improvement to the business balance sheet of $723,627.

Our fees as a % of debt reduction 3.45%.

Peace of mind for stakeholders – priceless.

“Rapsey Griffiths works with businesses, their advisors and their stakeholders to develop solutions in challenging and difficult situations for the benefit of all stakeholders.”

 Testimonial – Owners of the business.