LJ Hooker recapitalisation in doubt as receiver appointed

Moves to recapitalise companies at the helm of the LJ Hooker empire could be complicated by the appointment of receivers by an Asian pension fund lender.

Janusz Hooker at his home in Cammeray. Picture: AAP

Moves to recapitalise a series of companies at the helm of the LJ Hooker empire could be complicated by the appointment of receivers Aston Chace by an Asian pension fund lender.

A proposal to inject fresh funds into the business has been expected from LJ Hooker’s directors — most notably chairman and founding family member Janusz Hooker, who famously bought back into the namesake business in 2009 and later took control of the company.

Mr Hooker, with an international backer, took control of the firm in 2015, as earlier partners, including former chairman Greg Paramor, exited.

He registered new entities in the first week of June, prompting suggestions that he would seek to offer a fresh structure for the business.

The move came ahead of five non-operational companies associated with the famed real estate brand being put into the hands of administrators KPMG.

Mr Hooker, a former representative rower who won a bronze medal at the 1996 Atlanta Olympic Games, would not comment on the situation, but the plan has been to simplify the group’s structure and carry a lower debt load.

Throughout the administration the company has insisted the process did not affect the LJ Hooker consumer brand and franchise network, and the Singapore-based lender is understood to be supportive of the business.

But receivers Aston Chace were quietly appointed on June 19, with Vincent Pirina and Ian Niccol stepping in to a series of companies, including Empireal Holdings Ltd, which has been dubbed the ultimate holding company.

Hong Kong-based Madison Pacific Trust was listed as the secured party and it has previously been identified as acting for Koi Structured Credit. But it is not known whether the Koi entity is still involved or if another fund is driving negotiations.

While the recapitalisation plans are still in train, talks are believed to centre around the contributions that debt and equity backers will make to the new structure.

Administrators KPMG were called in on June 11 but have refused to comment, even after holding a first meeting of creditors on June 23.

They have declined to comment on how much the entities owe or identify creditors.

The companies in administration include the former holding company Empireal Ltd, as well as LJX Pty Ltd, LJX Holdings Pty Ltd, LJHRES Holdings Pty Ltd and LJH RES Ltd.

In late 2017, Empireal Holdings Ltd replaced Empireal Ltd as the ultimate holding company of the group, and Aston Chace is appointed to this company.

The most recent financial accounts for Empireal Ltd were lodged in January 2019, covering the 2018 financial year. They were audited by PwC.

Empireal’s earnings before interest, taxation, depreciation, amortisation and the one-off charges for that year were about $15.01m, up from $12.66m. But it fell to a statutory net loss before tax of about $6.19m.

The accounts said Australian and NZ housing markets had seen a decline in sales volumes in 2018. Despite tough market conditions, LJ Hooker’s franchise fees from sales performed ahead of market, and its market share remained consistent.

Empireal’s accounts show the lucrative nature of the LJ Hooker operation. It reaped $31.63m in franchise fees and $5.19m in marketing and promotional income.

Empireal had external borrowings of about $74.9m and it disclosed two main lenders. It was in a net liability position at June 30, 2018, partly due to the nature of its external funding.

In late 2017, it redeemed expensive convertible preference shares and replaced Macquarie Bank as its senior lender.

It entered a three-year agreement with Perpetual Corporate Trust, as trustee for ICG Australia Senior Loan Fund, run by Intermediate Capital Group.

The facility had a term of three years. Empireal’s accounts said if there was insufficient cash reserves to repay the loan it was expected that a successful debt refinancing transaction “will occur in December 2020 allowing the group to settle the liabilities”. It is not known whether ICG is still involved with LJ Hooker.

Empireal also had a facility with Madison Pacific Trust Ltd, as trustee for Koi Structured Credit Pte Ltd, through its LJX Holdings Pty Ltd unit.