Buyers eye off Dick Smith... and its $390 million debt

Dick Smith's receivers Ferrier Hodgson have started an online advertising campaign seeking expressions of interest for the acquisition of the failed retailer, which sunk into receivership last week.

Up for grabs is a business with 3,300 employees, around 400 stores in Australia & New Zealand, a 47-year legacy – and debts of $390 million.

According to a press release, the receivers had already received 40 initial expressions prior to the campaign launch.

Ferrier Hodgson will accept acquisition offers until 27 January and create a shortlist of potential buyers. Those applications can then submit a formal offer, with the process expected to run through February.

Newly appointed interim chief Don Grover will work with the receivers in attempt to secure an acquisition, after former chief executive Nick Abboud announced his resignation yesterday.

In a statement to the stock market, Ferrier Hodgson confirmed that Dick Smith owes nearly $400 million.

The list of unsecured creditors is yet to be released, with the first creditors meeting scheduled for Thursday morning.

According to The Australian, the secured debt consists of $60 million in overdraft fees to HSBC, $35 million in revolving working capital to NAB and another $40 million to NAB’s New Zealand branch for working capital.

Unsecured debt totals $250 million, which includes customers with existing gift vouchers. Ferrier Hodgson announced last week that gift vouchers and lay-by products would not be refunded. Coles, Kogan and Woolworths have all offered some relief for customers, pledging to exchange Dick Smith gift cards for credit with their respective stores.

The fallout across the IT vendor and distributor community is expected to be significant.

During its most recent annual report, Dick Smith posted a $56.8 million year-on-year increase in revenue to hit $693.8 million for the half-year to 31 December 2014, with net profit up $25 million to $25.2 million.

However, poor sales came to light when the electronics retailer was forced to write-down $60 million on inventory in December. The company ran a clearance sale during the month in attempt to recoup the cost, but failed to satisfy critics or rejuvenate its stock.