The Brindabella Christian College administration could be a drawn-out process, but it offered the best opportunity to put the school back on its feet. Photo: Michelle Kroll
Brindabella Christian College parents, staff and students face an anxious wait over the next month before the school’s financial situation becomes clearer but the Deloitte administrators goal will be for it to continue operating, albeit possibly in a slimmer state and with repayment plans in place for its secured creditor, NAB, and the Tax Office.
The current board may also need to make way for the restructure to work and be agreeable to all parties.
National Head of Restructuring & Recovery at RSM Australia Frank Lo Pilato said a first creditors meeting would have to be held on or about 18 March and a second creditors meeting within 25 business days.
But this second meeting could be adjourned for a further 45 days or later.
“So this could take a bit of time because you’ve got to get key stakeholders on board, particularly the government,” Mr Lo Pilato said.
At this second creditors meeting the administrators have got to make three recommendations: return the company back where it was, which is probably unlikely because of the Tax Office’s wind-up application; do a Deed of Company Arrangement to keep the school running and make an offer to creditors; or put the school into liquidation.
Mr Lo Pilato believed the latter was also unlikely because it was not really in anybody’s interests.
He said NAB as the secured creditor would prefer for the school to stay open because it was the vehicle for earning income and repaying the loan and interest to the bank.
Liquidation would mean most of the fixed assets – school property – would go to the NAB, with little or nothing for anyone else.
Neither the ACT Government nor the Federal Government want a school with more than 1000 students and 200 staff to close.
The administrators would also look at the books transaction by transaction – including commercial transactions with directors and related parties – to identify where the school had gone wrong and if anything untoward had occurred.
But with a tax debt and bills unpaid, there was a risk that Brindabella had been trading while insolvent.
The administrators would identify the assets, including unpaid fees and compile a list of creditors.
Mr Lo Pilato said the administrators would look at the business operating expenses to see where savings could be made or extra income generated.
That could mean reducing staffing levels or reviewing the fee structure.
Surplus assets such as equipment or motor vehicles could be sold off to generate cash.
“You just look at your cash flow and say, OK, this is what we need to do to improve our efficiency,” Mr Lo Pilato said.
The administrators would need cash to keep the school running, so securing Commonwealth funding, which the Education Department has already said will continue, would be a priority, as well as seeking funding from NAB to run the school and the administration, which will have the bank’s interests at heart.
It was likely that before the voluntary administration was announced, Deloitte had already been in touch with the bank to assess the situation.
While the ACT Government has ruled out a bailout at this stage, it could also be called on to inject some funding into the school.
This would give it even more leverage to demand a change of management structure, such as a new board, as part of an agreed way forward, and the administrator did have the power to do that.
Mr Lo Pilato said the administrators’ key message for the community would be that the school was still operating, teachers were being paid (those who hadn’t been were paid on Friday), and the doors were open.
“It’s an opportunity for the organisation to restructure, regroup, and you’ve got an independent party like the administrators to look at the cash flow, really do a critical analysis of it, work out where they’re making losses, where they can improve efficiency, so then it starts running profitably,” Mr Lo Pilato said.
To be clear, the board will not be consulted on a restructure of the college or on the way forward.
It has had no say or involvement in the governance, financial management or future direction of the college from when the administrators were appointed.
