Westfield owners take hard line against Harris Scarfe’s new owner
The owner of Westfield is taking a hard line against Harris Scarfe’s new parent company after a bold move put the shopping centres heavyweight off-side.
Business
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The owner of Westfield shopping centres in Australia is taking a hard line against Harris Scarfe’s new parent company, which put landlords off-side when it tipped the chain into administration.
Minutes from the first meeting of creditors show shopping centre heavyweight Scentre Group was the only participant to vote against giving administrators more time to undertake a major restructure of Harris Scarfe and find a buyer.
The objection from Scentre did not stop administrators gaining a five-month extension, granted by the Federal Court late last month.
Lodged with the corporate regulator last week, the minutes also show Scentre told the meeting it considered it “extraordinary” that the administrator had applied to the Federal Court for an extension without first informing creditors.
Harris Scarfe fell into voluntary administration on December 11, less than a month after the 170-year-old business was bought by Sydney-based Allegro Funds.
Receiver Deloitte last week announced it would shut 21 stores, resulting in more than 400 job losses.
The store closures, including three in Victoria and eight in New South Wales, will reduce the retailer’s network to 44 outlets. Meanwhile, unsecured creditors including suppliers and landlords are owed $98 million.
The collapse of Harris Scarfe is complicated as Allegro is also its key secured creditor, having taken over $70 million in debt when it bought the business.
Being a secured creditor means it will be paid back before unsecured creditors from any money raised during the restructuring and sales process.
The relationship between Allegro and landlords, who include Scentre, Stockland, Vicinity Centres and GPT Group, is understood to be tense.
Landlords only found out Harris Scarfe had been sold when the deal was publicly announced — a breach of change-of-control clauses in its lease agreements.
They also suspect Allegro is using the voluntary administration process to break leases and aggressively negotiate for rent cuts.
Scentre has 10 Harris Scarfe stores, Stockland five, Vicinity four and GPT two.
A Vicinity spokeswoman said there was strong demand for space across its fleet of shopping centres.
“We are continually looking at opportunities to evolve our centres to ensure we are meeting the changing needs of our consumers, which includes the opportunity to take back prime space where possible, and working with new retailers to improve our product offering,” the company said in a statement.
Suppliers have also complained about Harris Scarfe, saying the retailer dramatically ramped up its ordering of stock before it entered voluntary administration.
The minutes from the first meeting of creditors also raised concerns about a promotional flyer that went out to prospective buyers of Harris Scarfe less than three days after the chain was put in administration.
It offers the “unearthed retail diamond” for sale, saying it will span 39 stores “post right sizing”.
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Suppliers have questioned how such a detailed proposal could be put together so quickly and whether Harris Scarfe, under Allegro, was trading while insolvent.
Major suppliers facing considerable losses include Linen House, owed $3.3 million, Sheldon & Hammond, owed $2 million, Classica Kitchen and Giftware, owed $1.2 million and Sheridan, owed $1 million.
Classica managing director Robert Bekhazi said the collapse of Harris Scarfe had dealt his Melbourne-based business a huge blow.