Deep Creek liquidation: ASB recoups funds, other creditors face $1.4m loss
The canning line at Deep Creek brewery in Auckland, now shut down as the business struggled to cover what it owed.
An asset fire sale has seen ASB recover 60% of its debt from collapsed craft beer company Deep Creek but the likely outcome is grim for all other creditors, who are collectively owed about $1.4 million.
Deep Creek was placed into liquidation in October last year after an exporting problem left a big hole in its accounts and the brewer was unable to secure additional funding to cover the shortfall.
Paul Vlasic and Derek Ah Sam from Rodgers Reidy were appointed liquidators for Deep Creek, which was founded by Jarred Maclachlan, Paul Brown and Scott Taylor in Browns Bay on Auckland’s North Shore in 2011.
In a second report to creditors, the liquidators said they had sold all the company’s assets, including vehicles and plant and equipment, for $552,151, significantly below the book value ascribed in October of $866,065.
A further $77,912 was realised from the sale of stock (which had a previous book value of $300,000), while $96,790 has so far been recovered from debtors with the liquidators working through various issues with a number of parties in relation to the outstanding amount.
Vlasic and Ah Sam said in their report that on their appointment that Deep Creek’s accounting system indicated that receivables of $540,906 were outstanding, but, “after further investigations, it became apparent that the debtor’s system had not been reconciled and the initial figure was over inflated”.
All up, $878,496 has been realised in the liquidation, with secured creditor ASB getting back $365,000 of the $603,848 it was owed, and the rest going to administration costs, including liquidator fees of $139,559.
The liquidators are still investigating related party current accounts and any potential voidable transactions, but all material assets owned by the business have now been realised.
“It is unlikely that unsecured creditors will receive a dividend payment upon completion of the liquidation.”
Deep Creek’s 21 staff are also at risk of missing out, with claims for unpaid wages and holiday pay totalling $100,706. No payments have been made towards these claims.
The business also owes $173,113 in GST and PAYE arrears to the Inland Revenue Department (IRD). A further $15,688 is owed to the IRD in an unsecured capacity.
The liquidators also received a preferential claim from NZ Customs for excise tax totalling $195,419.
In total, preferential creditors are owed $469,239, and it is unlikely they will receive a payment by the end of the liquidation.
Unsecured creditors include the Ministry for Primary Industries, ACC and Meridian Energy.
The total amount owed to unsecured creditors currently sits at $921,184, with the liquidators confirming they will not attend to the formality of accepting or rejecting creditors’ claims until they are in a position to pay a distribution.
The liquidators are unable to estimate a likely completion date for the liquidation.
Deep Creek’s downfall came after a one-off can-seaming issue on the production line put an end to a shipment on its way to China, leaving the brewer with an estimated $450,000 hit to its cashflow.
The result of this left the company unable to pay its debts as they fell due.
“It was a failure of a piece of product in the plant that actually seals the lids on the cans. That wasn’t up to spec when the shipment left,” liquidator Ah Sam told the Herald back in November.
“When they arrived in China, some of the cans were leaking so the Chinese said ‘we don’t want this product’.”
Deep Creek’s troubles followed years of frequently tough conditions during the Covid-19 pandemic.
Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.