Good news, bad news for ex-Pixies

In a close-run and warmly-debated decision requiring a casting vote from the administrator, Pixifoto creditors agreed last week (September 27) to a Deed of Company Arrangement (DOCA) rather than immediately sending the failed business into liquidation.

‘The DOCA was for the benefit of the creditors as a whole,’ explained BCR Advisory’s John Morgan, the administrator for Pixifoto. That benefit hinges on Pixifoto UK continuing to contribute monthly dividends to the administrators, thus boosting the available funds to creditors. ‘He [director, Peter Watt] didn’t have to do that,’ Mr Morgan noted.

The 283 ex-employee creditors are owed $2.4 million and it’s anticipated that they will receive payment in full – 100 cents in the dollar. The 723 trade creditors account for another $1.4 million. However, over 600 of these – mostly customers seeking refunds, etc – are owed under $100. Mr Morgan said they could expect somewhere between 30 and 40 cents in the dollar.

Another class of creditor are four Pixifoto-related parties overseas who have been putting money into the failing Pixifoto Australia over the past few years. They are owed a further $5.7 million. This will be written off, and Peter Watt himself will lose around $800,000.

There was a public asset auction last week to sell off studio equipment, cameras, etc, with other assets including some cash in the bank, outstanding trade debts, the on-going monthly dividend from Pixifoto UK, and funds from the sale of the schools photography business.

Mr Morgan said the sudden shutting down of the business, with employees given little notice, was a decision of BCR Advisory rather than Pixifoto itself, as it was felt trading on under administration was too risky.

DOCA versus liquidation

A deed of company arrangement (DOCA) is a binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with following the company entering voluntary administration.

Sometimes a DOCA is designed to enable a business to trade out of its difficulties. The objective in this case, according to Mr Morgan, was to provide a better return for all creditors than would have been the case in an an immediate winding up of the company.

‘The timing, in terms of employees getting the money back, is the only problem,’ he said.

Mr Morgan said he expected the matter to be finalised for ex-employees between June and December next year.

A DOCA must ensure that employees’ entitlements have the same priority as in a liquidation, so employees have the right, if there are funds left over after payment of the fees and expenses of the voluntary administrator and deed administrator, to be paid their outstanding entitlements in priority to other unsecured creditors.

Had the company gone directly into liquidation, employees would have had access to the Federal Government’s Fair Entitlements Guarantee.

This would have seen them being paid their entitlements by the Federal Government, which then takes their place as a priority creditor. Mr Morgan said that had they access to the Fair Entitlements Guarantee, ex-employees would likely have been paid out within four to six months.

He said the current situation where employees can’t access the Fair Entitlement Guarantee when a DOCA is entered into is an anomaly.

‘I’m going to write a letter to the Minister so this sort of situation doesn’t happen again,’ he said. ‘We can’t do anything about it.’

Priority employee entitlements are grouped into classes and paid in the following order:
1.outstanding wages and superannuation;
2.outstanding leave of absence (including annual leave and sick leave, where applicable, and long service leave), and;
3.retrenchment pay.

Each class is paid in full before the next class is paid. If there are insufficient funds to pay a class in full, the available funds are paid on a pro rata basis (and the next class or classes will be paid nothing).

Mr Morgan said that Pixifoto, while a thriving business in its heyday, had been a victim of technological change and failed to continue to innovate in recent times.

While the schools photography business and a small number of the portrait studio locations had been profitable, as a whole the studio business had been losing money for a number of years.

He said in many business failures, the seeds of destruction are planted five to ten years before the decisions is made to close.


6 thoughts on “Good news, bad news for ex-Pixies

  1. “Mr Morgan said that Pixifoto, while a thriving business in its heyday, had been a victim of technological change and failed to continue to innovate in recent times.”
    Failed to continue to innovate? From what I could see in my short time with the UK company, they chose to fail! Rather than invest in decent digital gear, the Australian company accepted the junk the UK were replacing. I’m sure at that time, they were still under the same directorship.

  2. A New Zealand customer has managed to get a response from the Pixi Foto Facebook page I see:

    Manas Nanda
    Hi, I bought a coupon worth $170 for portraits. Since you guys have shut down operations in New Zealand, how do I get the refund?
    At least, you should have provided a contact number or Refunds Center. This is so unprofessional on your part. Please let me know asap.
    Yesterday at 04:08 near Auckland, New Zealand

    PixiFoto Hi Manas, please email [email protected] and our customer service team will be able to look into this for you, thanks.
    22 hours ago

    Pixi UK have previously said they are not associated with the failed business in Aus/NZ but are now showing they are.

    • They were affiliated with the Australian/ New Zealand business , until the owner sold the UK business to his son for $1. It was the only profitable part of the business. This isn’t illegal, but its immoral, so the UK should be providing refunds.

  3. I heard that there was a sale of assets. I have a 3 different studios and only just found out about it. You would think that a liquidator would be after the best price and would advertise to a few of the bigger studios. Well I heard the prices went for a bargin…well if feel bad for me as i missed out and for the employees who could have received more

  4. The UK business was a profitable business, and was sold to the owners son for $1, so wasn’t affiliated with the Australian business when it went into administration. It only seems right that the UK business is paying monthly dividends so the employees get their entitlements.

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