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Creditors have voted to save Hills Limited (ASX: HIL) from falling into the hands of liquidators after agreeing to a deed of company arrangement (DOCA) as administrators run their eyes over offers to buy the business as a going concern.
In an announcement to the ASX today, administrators Sule Arnautovic and John Vouris of Hall Chadwick Chartered Accountants revealed that the company’s creditors yesterday voted to accept the DOCA proposed by Starplex International, a decision that leaves nothing for existing Hills shareholders.
The DOCA was accepted by creditors after they were told they would receive 68.39c in the dollar for the debts owed to them.
Starplex is a related party of the company's largest unsecured creditor, Stellar Vision Operations, with the DOCA set to hand control of the business to Starplex.
Hills, which no longer has any association with the clothes hoist that became a backyard staple in suburbia during the post-war era, is a provider B2B solutions in the building technologies sector and it was placed into administration in June.
The administration comes on the heels of a $5.48 million loss, plus costs, in the Court of Appeal by Hills’ health division the previous following a long-standing legal action brought by Stellar Vision Operations.
Stellar is listed as an unsecured creditor owed $8.4 million out of a total of $10.9 million in claims by unsecured creditors.
Prior to calling administrators, Hills revealed it had been engaged in ongoing negotiations to settle the claim with Stellar and its financier, with the court loss said to have had a ‘significant impact on the company’s financial condition’.
However, the administrators have revealed that Hills was not operating while in solvent when they were appointed with the business continuing to operate under their control.
They also revealed their investigations showed the company had a net surplus of assets over liabilities.
Hills has unrecognised tax losses of $257.78 million, which could be viewed as valuable in a sale process.
“Our preliminary investigations into the affairs of the company indicate that the primary reason for the appointment of administrators was due to the (company’s) inability to enter a settlement agreement with Stellar regarding the judgement debt owed,” the administrators’ report revealed last month.
“If this judgement had been enforced, the (company) would likely be facing financial difficulties.”
The settlement negotiations with Stellar were triggered after Stellar successfully appealed the Supreme Court's dismissal of an earlier claim against Hills Health Solutions.
The Court of Appeal overturned the finding in early 2022 that Hills Health had not 'breached express trust, fiduciary obligations, and contract when it appropriated to itself the benefit of a contract for supply of entertainment systems to hospital patients'.
Meanwhile, the administrators received 51 expressions of interest for the purchase of the Hills business as part of the DOCA process. The administrators have shortlisted seven parties from 13 non-binding offers they received.
They say none of the sale offers would have provided a return to creditors greater than that proposed by Starplex's DOCA proposal.
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