SurfStitch Administration Update

SurfStitch Administration Update

The creditors report pursuant to section 439A of the Corporations Act 2001 has been released by the Administrators, providing an overview of the position of SurfStitch and their recommendation to enter in a Deed of Company Arrangement (EziBuy DOCA) with Ezibuy Holdings Limited (Ezibuy).

Under the terms of the EziBuy DOCA, Ezibuy will acquire SurfStitch Australia Pty Limited (SurfStitch Australia) and some related intellectual property in exchange for a convertible note in Ezibuy, convertible for up to 8% of the equity of the combined entity in 3 years’ time.

In respect to the proposal we make the following comments:

  • The offer put forward by Ezibuy was in part negotiated by our advisers, when it became apparent there was no reasonable offer to restructure the business from the sales process instigated by the Administrators.
  • The financial performance of SurfStitch Australia has deteriorated significantly, with falling working capital, worsening credit terms and management security.  The business is no longer sustainable in its own right. In the event of liquidation NO value would be returned to shareholders and limited returns to the class action participants.
  • We did make attempts to negotiate better terms and more certainty from the Cheadle proposal but were unable to reach a satisfactory position.
  • Ezibuy and their management team, along with their sponsors Alceon have a proven track record in turning around struggling retail businesses including NoniB Limited and Ezibuy itself.
  • The merger will be transformational for both companies: Ezibuy will get access to SurfStitch platform technology, and SurfStitch will get access to Ezibuy greater buying power, lower transport cost structures, greater working capital and experienced retail management.
  • The resultant merger if approved however, will mean that the SurfStitch Group is likely to be delisted from the ASX.  The value of SurfStitch shares on a stand-alone basis are nil. Any future value will only result from a sale of the listed shell or the value of the convertible note.
  • We recommend the Ezibuy DOCA proceed, because it represents a greater return than the liquidation option, and provides shareholders with a return.
  • The proposal does not include legal actions against the former directors which we have already commenced and are outside the Ezibuy DOCA.

What you need to do

The Administrators have advised that they will call for proof of debts and proxies from claimants through Link Insolvency Solutions and that these must be lodged by no later than 2.00 pm on 29 March 2018. 

  1. If you have already completed a proof of debt and proxy and submitted it to us, you do not have to complete another form and we will lodge the proofs for you.
  2. If you have not lodged your proof of debt and proxy, then we request you complete the forms on the “LINK” portal before 27 March 2018. You will be asked to attach additional information, your buy and sell confirmations if you have them will be sufficient.
  3. Where it asks you to nominate a proxy (a representative at the meeting) put the name “Glenn McGowan QC” or in his absence “Damien Hodgkinson”. Glenn will hold your vote at the meeting.
  4. Lodge the proof of debt and proxy on the portal and print a copy for your records, and email a copy to us so we can check off our records.

Valuing your claim

As per our previous emails, if you have an estimate of your loss, please include this amount, or use the default estimate for investors with bundles less than $50,000 of an estimated loss of $10,000. The estimate in your proof of debt is just for voting purposes at the meeting and it is not a complete estimate of your actual loss, and would be adjusted before any distribution is completed.

It is likely that the Administrators will only admit the proof of debt for a nominal amount for voting purposes (because our class action claim is unproven at present).

Participating for a Dividend

In order to participate in the convertible note distribution, shareholders must be a member of a class action. If you are not currently registered, please register on our website.

The date of the Meeting

The date of the second creditors’ meeting has now been set for Wednesday 4 April 2018.  We will report on the outcome of the meeting and approval in due course.

Glenn McGowan QC

Partner & Chief Counsel

Rebecca Di Rago


This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.