Daisytek Australia in administration

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Consumables distributor Daisytek Australia has been placed in voluntary administration, following filings earlier this month by US subsidiaries of its parent company Daisytek International Corporation for Chapter 11 bankruptcy protection.

The board of directors for Daisytek Australia and UK-based ISA International had each appointed a voluntary administrator.

PriceWaterhouseCoopers' (PwC) Martin Brown has been appointed as administrator of Daisytek Australia and will attempt to assist the company to trade through its woes.

A company statement said PwC's appointment follows a "significant tightening of credit terms by vendors and funding sources in Australia and the UK that have occurred since Daisytek's restructuring announcement in the US. "The mounting restrictions have resulted in both subsidiaries' inability to meet current obligations," the statement said.

"The directors of Daisytek Australia and ISA International have taken this action to preserve the going concern value of each and provide equitable return to their respective creditors," the company said.

David Cullen, MD at Daisytek Australia, said for around two months, vendors had tightened credit lines to the distributor and "tightened them ever further" when subsidiaries of the US parent company filed for Chapter 11 protection earlier this month. "They [suppliers] have all got their protocols and it makes it that much tougher when you are in that position from the US perspective," Cullen said.

Cullen said Daisytek Australia has a strong business and will trade through and come out the end as a stronger company. A reorganisation of Daisytek Australia has involve "five or six scenarios," he said, but declined to elaborate further. "We will be a much stronger company with a solid balance sheet," he said.

When Daisytek's US subsidiaries entered Chapter 11 earlier this month, Cullen said the Australian operation had its own vendors, agency agreements and credit facilities and it was business as usual. At the time, he said the local operation was judged and financed on its own merits.

Daisytek International Corporation also announced this week a demand for 4 million pounds from GMAC Commercial Finance to satisfy obligations arising under a guarantee executed by the company in favour of GMAC. GMAC had not initiated proceedings to collect the guarantee, the company said.

A creditor's meeting is being held in Sydney today to approve the administrator. A PwC spokesperson was still unclear about Daisytek's options to trade out of the administration.

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