The administrator appointed to failed labour hire company Bluestone Global has recommended it be wound up, which would likely result in unsecured creditors receiving none of the money they are owed.
The company, which had more than 4000 employees, collapsed last month and a large number of staff have already found alternative employment.
A creditor report by the administrator, KordaMentha, has found Bluestone has an estimated deficiency of $89.7 million, with just $4 million of this owed to a secured creditor.
Bluestone has traded unprofitably for several years with the downturn in the resources sector, coupled with the softness in the broader economy, weighing on the company's prospects.
At the time of its collapse, Scottish Pacific Business Finance was owed $12.4 million for debtor finance facilities, with Gleneagle Securities holding security over a $4 million advance to the company. The largest single creditor would appear to be the Australian Taxation Office, which is owed $28.6 million.
In looking at why the company failed, the administrator report highlighted competitive industry conditions, the fact that Bluestone was operating a low-margin business which had a significant trading loss, a failure to integrate acquisitions and extract economies of scale, along with the reliance on external funding to sustain the trading losses.
Additionally, Bluestone directors attributed its trading difficulties to a rapid expansion that involved acquiring labour hire and recruitment businesses with no effective integration and no attainment of scale benefits, the purchase of ResCo which created an average annual cash loss of approximately $5 million, no control of overheads which were high due to antiquated IT systems, no control over receivables which hurt cash flow, the ATO debt, reliance on debtor funding with a relatively high effective interest rate, low trading margins and a lack of funding options and lack of success in finding a buyer of the group.
The administrator said it would be in creditors' interests if the company was wound up and that while some "preferential payments" may be recoverable, since there were minimal assets and the prospect that the cost of administration and liquidation would likely exceed any recovery from assets, the existence of secured creditors means "we do not anticipate a dividend being paid to unsecured creditors".
"Unaudited accounts suggest the group would have reported a net loss of approximately $8.3 million for the year to June 30, 2014," the report noted.
This was after $9 million of debt was converted into equity in May, however, and the loss would have been "substantially worse" had this swap not taken place.
