Buy now pay later company Openpay appointed receivers and managers yesterday, after it was unable to resolve funding issues with its lenders.
The company announced that it has appointed Barry Kogan, Jonathan Henry and Rob Smith, partners at McGrathNicol, as joint and several receivers and managers. They are now in control of the company’s assets and operations.
Customers and merchants have been notified that they will not be able to use the Openpay platform.
The company requested a suspension in trading of its shares on Friday, reporting that it had breached its loan covenants.
It said it had issued a utilisation notice under its working capital facility with AH Meydan Pty Ltd. The funding amount was to have been received by January 31 but the payment was not made.
This put Openpay in breach of covenants in loan agreements with its senior secured lenders.
The company was in discussions with its lenders over the weekend but no resolution was achieved.
It has a A$12.5 million working capital facility, a $30 million corporate debt facility and a $110 million receivables funding facility provided by GCI Commercial Finance and Fortress Investment Group.
The company has been technically insolvent since June 30 last year, when it had a net liability of $14.9 million.
It reported a loss for $82.4 million for the year to June 2022, following a loss of $63.1 million in 2020/21.
Revenue grew from $26.3 million in 2020/21 to $34.2 million in the year to June but the employee benefit expense alone was $44.1 million, other operating expenses were $33.3 million, finance costs were $17.7 million and the receivables impairment expense was $9.4 million.
Net cash used in operating activities was $81.2 million. Cash and cash equivalents on the balance sheet fell from $52.1 million in 2020/21 to $10.3 million at June 30.
McGrathNicol said in a statement: “The receivers and managers will work closely with Openpay’s employees, merchants and customers to urgently determine the appropriate strategy for the business.
“It is expected that the shares in the company will continue to be suspended until further notice while the assessment of the appropriate strategy is ongoing.”
According to the company’s December quarter update, it has 347,000 active customers and 4200 active merchants. Transaction value during the quarter was $126 million.
The company closed its operations in the US, the UK and New Zealand last year in an attempt to cut costs. But it was not enough.