Geon’s receiver McGrathNichol has vented at the company’s paper merchants for not maintaining supply during the receivership, and accusing them of holding the company ‘hostage’.
Shaun Fraser, partner at McGrathNicol says, “We are terribly disappointed at this outcome as the suppliers actions add to the uncertainty for creditors and employees.”
The receivers and Geon CEO Graham Morgan have pleaded with paper merchants to maintain supply, saying payment for ongoing supply is guaranteed. However the merchants BJ Ball, Spicers and KW Doggett, which on Friday were joined by labelstock manufacturer Avery Dennison, are firm in their position, no doubt mindful of the rage that would ensue from the rest of the trade should they supply Geon, which is in the midst of an attempt by owners KKR and Allegro to shed its debt.
In its letter to the merchants the receiver says, “You have indicated that a pre-condition of continued supply is that your pre-appointment debt is paid in full. This is not possible. Any such ‘hostage’ payment would be at the expense of employees as that payment could only be made from circulating asset recoveries, against which employees have a priority claim.
“Additionally, that would put you at an advantage to other unsecured creditors. Given the potential position of employees those are demands to which I cannot agree.”
Having made their position clear it is highly unlikely the paper merchants will change their minds and begin supplying Geon, and they are under no legal obligation to do so - providing there has been no collusion – until their debts are paid.
Fraser says, “Paper supply is the principal raw material input for the business. Despite indicating to paper suppliers how important it was for Geon to continue to receive supply in order to preserve the company’s value, maintain employment and avoid liquidation; supply has not been forthcoming.
“Continuing to supply Geon during the receivership carried negligible credit risk for suppliers as they benefit from a super priority guarantee of payment provided by the Receivers.”
