Ostra Distillers director partners with Hilco Capital on rescue plan
UK turnaround specialist Hilco Capital is backing a revival of Victorian whisky maker Ostra Distillers, bankrolling a rescue plan to avoid liquidation.
UK turnaround specialist Hilco Capital is backing a revival of Victorian whisky maker Ostra Distillers, partnering with the company’s founder in a last ditch bid to avoid liquidation.
Creditors owed millions following the company’s collapse in November will meet next week to vote on a proposed deed of company arrangement put to them by founder and director Dawid Ostrowski, and funded by HUK138 – a special purpose vehicle controlled by Hilco Capital.
As part of the repayment plan, HUK138 has already deposited $249,000 into a deed fund and paid $2.1m to take over debts owed to financier Judo Bank. It is promising to inject a further $2.8m into the deed fund which will be used to repay unsecured creditors – owed up to $4.5m – via a creditors’ trust.
In exchange, a nominee of HUK138 will assume a 51 per cent stake in the company.
The details of the proposal are outlined in a report to creditors from administrator Shane Cremin of Rodgers Reidy, following expressions of interest campaign that sought offers from potential buyers or investors.
In his report, Mr Cremin says Mr Ostrowski and HUK138’s proposal had emerged as the best option for creditors, after an alternative DOCA proposal was withdrawn, and following failed negotiations with another group interested in acquiring some of the company’s assets.
He’s recommending that creditors vote in favour of the proposal when they meet on March 12, suggesting unsecured creditors would receive a dividend of 31c-100c in the dollar under a DOCA arrangement, far exceeding the maximum 4c return expected if liquidators are appointed to wind up the business.
“We have been provided with a cashflow forecast from HUK138 detailing the company’s expected trading performance over the 12-month period from February 2024 to January 2025,” the report says.
“The forecast indicates that the company will have available sufficient cash to meet its obligations to the trust over the said period which, coupled with HUK138’s commitment to provide funding to the company to effect the terms of the DOCA, provides a level of comfort that the company will have the capacity to make the further contributions to the trust.
“The DOCA will involve the re-employment of key staff who will assume a familiar role at a familiar location. The DOCA will enable the company’s business to resume trading at full capacity free of its previous financial obligations to creditors.”
Ostra Distillers has been operating in “caretaker” mode since administrators were appointed on November 22, less than two years after it paid $1.1m for brewing equipment from the iconic West End brewery in Adelaide.
The company acquired the brewhouse from drinks giant Lion, with plans to create Australia’s largest malt and grain whisky distillery at its Robinvale facility, 90km southeast of Mildura.
It operated as a contract manufacturer, but had plans to launch its own brand later this year.
Mr Ostrowski has previously said a combination of higher business costs, interest rate hikes, and cost of living pressures that had crimped demand for high-end whiskys, had eaten into the company’s cashflow, just as it took on more debt to fund the acquisition of the brewhouse at the start of 2022. Negotiations over a $21m capital raise then fell through later that year.
However, in his report, Mr Cremin says the company’s failure may have also been caused by “poor strategic management”, “a lack of property controls and agreements”, and “payments made from the company for the benefit of related parties”.
The report says administrators were also required to obtain a temporary producer’s liquor licence after investigations revealed Ostra Distillers had been operating without one, and may have been in breach of Victorian liquor laws.
“Our investigations have identified payments made by the company totalling $448k to Mr Sebastian Ostrowski (the director’s brother) in the four-year period prior to our appointment,” the report says.
“Based on the information in our possession, it would appear that there was no basis for the company to make the payments which appear to relate to obligations of the director and other related parties.
“As such, we have formed the preliminary view that the payments may constitute unreasonable director-related transactions that may be recoverable by a liquidator in a liquidation scenario.”
Administrators have identified close to $1m in other potential claims that would be investigated in a liquidation process, including claims for insolvent trading dating back to March 2023.
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