Customers of Australia’s biggest refrigerated logistics firm knew it was in trouble before collapse

Australia’s biggest refrigerated logistics firm was demanding quicker payments from customers and being shopped around for sale by Anchorage Capital shortly before its administration.

A three-way bidding contest has emerged for Scott’s Refrigerated logistics.

The fate of Australia’s biggest refrigerated logistics provider Scott’s is expected to be known as early as Monday after bids for the failed company closed on Thursday.

Scott’s went into receivership this week, threatening 1500 jobs and food deliveries to Australia’s major supermarkets.

But The Australian can reveal Scott’s customers knew all was not well at the company when it recently adjusted its payment terms from 30 to seven days in an effort to improve cash flow - a severe warning the company was in financial dire straits.

It is understood that Scott’s biggest customers have been asked to help fund the company until a sale is completed. Melbourne-based insolvency specialist KordaMentha declined to comment on the funding request.

The firm - headed by Mark Korda and Mark Mentha - will spend the weekend assessing bids for the company, which has 24 cold storage warehouses across all mainland states.

Lindsay Fox’s Linfox and ASX-listed trucking company Lindsay are understood to be the two main contenders to buy Scott’s. Toll Global, owned by private equity firm Allegro, was also believed to be weighing up its options.

KordaMentha has been able to complete an expedited sale process after private equity firm Anchorage - which bought Scott’s from ASX-listed car dealer AP Eagers in mid-2020 - had already begun moves to offload the company, including hiring bankers.

But doubts about Scott’s financial viability emerged late last week when Anchorage was assembling a dataroom for a potential sale. By Monday, Anchorage had placed Scott’s in voluntary administration, appointing McGrathNichol.

The administration period was one of the most short-lived, with secured creditors engaging KordaMentha as receivers less than 90 minutes later.

KordaMentha has picked up the sale process, which Anchorage began, believing it is the most efficient way to secure the company’s future and ensure groceries keep flowing to supermarkets.

ScottsRL assets, including 24 cold storage warehouses and fleet of 500 trucks, are an attractive acquisition for existing logistics providers like trucking magnate Lindsay Fox. Picture: Aaron Francis

Scott’s directly supplies Coles and Aldi, while it delivers on behalf of vendors to Woolworths and Metcash’s IGA stores. Its Coles contract alone accounts for about 15 per cent of its business.

While the company’s trucks have maintained delivering food to supermarkets for now, supplies could be put at risk if a rescue deal cannot be hatched.

The supermarkets have been working to keep ScottsRL trucks running to not only keep supplies on shelves but also stem further price inflation from a potential lessening of competition in the refrigerated logistics market.

It is understood ScottsRL assets, including 24 cold storage warehouses in all mainland states, and fleet of 500 trucks, is an attractive bolt-on acquisition for existing logistics providers, looking to bolster market share.

Mr Mentha and Mr Korda have become two of Australia’s most famous accountants, overseeing the fallout of Ansett’s collapse more than 20 years ago - a process in which they became familiar with Mr Fox.

Mr Fox and another billionaire Solomon Lew attempted to buy Ansett, but the deal failed, after months of negotiations.

Mr Mentha subsequently described Mr Fox as the sort of person Australians love, citing his rough and ready nature while he said Mr Lew was more private, brokering deals behind the scenes.

The need to strike a rescue deal for Scott’s is critical. Supply chain disruptions from pandemic-fuelled labour short­ages and wild weather have been key drivers of grocery inflation as well as stock shortages.

It comes less than three months after Anchorage bought department store David Jones for $100m.

Concerns about Scott’s finances first surfaced in mid-2021 - a year after Anchorage took over the company.

Scott’s most recent financial report, lodged in December last year and covering the 16 month period to the end of June 2021, shows the company turned over more than $542m during that time, making a loss of $7.3m

The report included a “going concern” statement, which is required when a board recognises a risk to a company’s ongoing ability to pay its debts.

The quantum of debt owed by Scott’s, which Anchorage bought from ASX-listed car dealer AP Eagers in mid-2020 for an estimated $75m, is unclear at this stage.

The company was also hit with problems upgrading its Transport Management System, causing “an adverse effect on operations for eight weeks’’, while flooding on Australia’s east coast in early 2022 also impacted the firm.

The report says the net current liabilities owed by Scott’s came in at $37.16m while its net assets were $27.7m, with a deficiency in net assets a key measure in assessing a company’s solvency.

KordaMentha’s Scott Langdon said earlier this week that an “orderly sales process” for ScottsRL would begin immediately. “We anticipate a high level of interest in this business and its assets, given its significance in the cold chain supply system in Australia,” he said.

“We are seeking support from all customers to give the business the best chance of being sold to a new long-term owner.”