Administrators’ report recommends vote for liquidation.

A union lobbying for hundreds of Pumpkin Patch workers owed millions by the collapsed childrens' retailer said it would vote in favour of liquidation for the company.

Pumpkin Patch entered voluntary administration in October, and a watershed meeting of creditors next week has administrators McGrathNicol urging creditors to vote for liquidation in order to explore options for recovering $70m owed to ANZ bank and others.

Robert Reid, the general secretary of FIRST Union, said he expected his members would vote in favour of liquidating.

"It can't be returned to directors, there can't be a Deed of Company Arrangement: It has to go into liquidation," he said.

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Reid said FIRST represented a small portion of the 204 workers at Pumpkin Patch headquarters owed around $5m, but was lobbying for all staff after corporate structuring saw their legal employer - Pumpkin Patch Limited - carrying no assets.

He said the company's receiver, KordaMentha, presumably with ANZ's permission, had paid out holiday pay in order to keep some staff on to wind down the business, but redundancy and other entitlements were still owing.

A spokesman for ANZ said they did not comment on "individual customer issues".

"It's worth remembering that ANZ is also in the queue of creditors," the spokesman said.

Reid said he was undecided on whether to support McGrathNicol's bid to take over as liquidator.

The Herald understands other insolvency agencies also mulling a shot at Pumpkin Patch.

A detailed report by voluntary administrators McGrathNicol on the former sharemarket high-flier - at its peak worth more than $800m but now effectively worthless - outlined a company that "had been in a steady state of decline for many years" and recommended creditors vote for liquidation at the watershed meeting scheduled for March 7.

The administrators noted that the company's banker, ANZ, was secured and facing a shortfall meaning that trade suppliers and former employees faced recovering nothing without additional action.

"Unless there are recoveries that become available in liquidation ... there will be no recoveries available to unsecured creditors," the report said.

According to the report the company's banker ANZ - who appointed receivers KordaMentha in response to the move of the board to appoint McGrathNicol - is owed $59m.

While the administrators did not tally the unsecured debt, receivers' reports for the five companies in the group suggest this class of creditors is owed $17.4m.

The company employed 1591 people, with 545 at its headquarters and 44 stores in New Zealand, and the remainder based in 120 stores in Australia.

The report said the board had struggled to secure a long-term future for the debt-laden company, but an approach to ANZ to restructure its loan facilities - including converting debt to equity - was rebuffed.

Having concluded shareholders were also unwilling to invest further in the business, directors appointed McGrathNicol on October 25, a move matched hours later when ANZ sought to protect its position by appointing KordaMentha as receivers.

The company's history is broadly explained by the administrators as having two phases.

There was an expansion followed by long and slow decline. Rapid growth into the United States and United Kingdom markets in 2006-7 coincided with the global financial crisis and a subsequent retreat.

Losses from this adventure are assessed by the administrators as costing $98m and were met almost entirely though debt.

The administrators note during this period the company's board pursued a policy of paying out the majority of profits as dividends (97 per cent of taxable profits between 2005-2011) leaving little for reinvestment.

The more recent phase saw problems going unfixed due to the company's suddenly-constrained financial position.

"The group had insufficient capital to exit stores through negotiating early termination of leases with its landlords," the report said.

Similar problems were found with the company's stock management being partly blamed on out-of-date software.

But the report said while the company was aware its generic software wasn't fit for the purpose of merchandise planning, it was unable to raise the required $8m to procure a replacement.

A repayment of $25m to ANZ in 2015 was the result of what administrators described as an "aggressive sales campaign" aimed at reducing stock levels.

"The significant sell down of inventory and reduced level of purchases of new season stock in FY15 resulted in stock availability issue for online and clearance stores in FY16," administrators said.

Pumpkin Patch: Board vs Bank timeline

● August 12 - Pumpkin Patch board request ANZ restructure debt, converting "substantial" proportion of $59m debt to equity.

● October 20 - Board hears 90 per cent of shareholders are unwilling to countenance alternate capital injection.

● October 21 - NZX trading halt after advising that was unlikely any equity value remained.

● October 24 - Board request ANZ either capitalise debt and advance $5m capex, or guarantee obligations during orderly sale process.

● October 25 - ANZ reply that neither option practicable.

● October 26 - Board appoints McGrathNicol as voluntary administrators. Hours later, ANZ appoint KordaMentha as receivers.

● March 7, 2017 - McGrathNicol-scheduled watershed meeting for creditors has liquidation recommended.