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The local anaesthetic of turnaround promises has finally worn off for embattled dental group Smiles Inclusive (ASX: SIL), as its inability to pay back a $12 million loan to National Australia Bank (ASX: NAB) triggered the appointment of voluntary administrators yesterday.
The news came hot on the heels of the departure of yet another director, and the belated production of half-year results that not even the auditor had the confidence to stand behind.
Questions about Smiles Inclusive's solvency have been raised by former business partners for more than a year now, with parallel allegations over hundreds of thousands of dollars owed.
But the NAB debt, originally at $19 million but reduced in order to recoup a portion of the loan, took centre stage.
Impeded by severe limitations on raising capital and operations that have run at a loss, yesterday the Gold Coast-based company confirmed it had not been able to raise the funds needed to repay amounts due under a deed with NAB.
As a result, NAB terminated the release deed having earlier cancelled and demanded full payment of all amounts owing to it under its facilities on 19 October 2020.
In response the dental company appointed Luci Palaghia and Tim Heenan of Deloitte Restructuring Services as voluntary administrators for both the Smiles Inclusive corporate group and Totally Smiles Pty Ltd.
"Unfortunately, we were unable to refinance the NAB debt in the time frame required so we have taken the decision to appoint voluntary administrators to continue our efforts to restructure the group," said chairman and founding director David Usasz.
"The board will work with the voluntary administrators to put forward a deed of company arrangement proposal for the benefit of all stakeholders."
CEO Michelle Aquilina, who took the reins of the beleaguered outfit after former head Tony McCormack resigned in the thick of nationwide lockdowns and staff stand downs, said yesterday's decision was about securing the future of Totally Smiles and emerging on the other side.
"Industry demand for oral health services remains strong and we will continue to provide services to the community across our network as we work through this process," she said.
"This current environment has been challenging and the Board regrets these events have occurred just when we were progressing on a significant transformation program to reset our cost base, which included consolidation of our workforce, renegotiating supplier agreements and simplification of our portfolio and as well as taking steps to repair our balance sheet."
Voluntary administrator Luci Palaghia said the immediate priority was to work closely with joint venture partners, management and practitioners to maintain operations and minimise business disruption, while expressions of interests are sought for the sale or recapitalisation of the business.
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