Isaac Davison

Isaac Davison is a NZ Herald political reporter.

$830 hr to save bookshops

REDgroup was placed in voluntary administration on Thursday. Photo / Dean Purcell.
REDgroup was placed in voluntary administration on Thursday. Photo / Dean Purcell.

Whitcoulls and Borders workers face the axe, customers must pay to use gift vouchers - but the managers given the job of sorting out the bookstores' finances are being paid up to $830 an hour.

REDgroup Retail, owner of the two chains, appointed administrators Ferrier Hodgson last Thursday to do the forensic work on its accounts.

A guide to hourly rates obtained by the Herald shows that partners managing the administration process make $830 an hour.

Several partners work on an auditing job at once, in a process which can take a month or more.

Even a junior filing clerk is charged out at $205 an hour for services which include helping with administration and day-to-day field work.

National Distribution Union general secretary Robert Reid said the "huge" administration fees were an irony compared to the meagre pay packets for Whitcoulls staff.

"This is typical of the fees paid to receivership-type companies," he said. "For a lay person, for people on minimum wage, our jaws just drop.

"Over the past few years, Whitcoulls has said it couldn't afford any pay increases for staff. Now, when it finally collapses, these huge rates have to be paid."

Ferrier Hodgson spokesman Michael Cave said the company could not give a reliable estimate of the total cost of the process.

The total fee will be presented to creditors at a meeting next week, and they must vote to approve it.

When asked how Ferrier Hodgson could justify charging between $200 and $800 an hour for staff involved in the administration, Mr Cave said: "We're a professional organisation charging competitive rates."

He said Ferrier Hodgson would make a recommendation on what should happen to the company, reveal its fees to creditors and ask them to vote in support.

"Our fees are subject to a resolution from creditors. They get to vote on it, they get final say."

The fees also had to reflect the level of risk the company had taken on.

Meanwhile, customers are angry over their frozen rewards schemes and voucher system.

REDgroup was placed in voluntary administration on Thursday. The company owns 260 stores in three countries. They include 60 Whitcoulls and five Borders outlets in New Zealand and the Angus & Robertson chain in Australia. About 1000 people are employed in New Zealand.

The administrators have suspended the chain stores' reward scheme, under which customers gain discounts for their spending.

Gift vouchers can be used if double the vouchers' worth is spent in cash.

The company said it was under no obligation to honour the gift cards.

Consumer NZ said the move was legal, as holders of vouchers and rewards points were unsecured creditors. The consumer watchdog has advised customers to use the vouchers while they can.

Customer David Haywood said he had spent thousands at Whitcoulls since joining the rewards scheme, but faced losing all his credit.

"It makes you wonder about the value of being a loyal customer."

Mr Haywood said the amount executives were being paid to manage REDgroup's financial situation was "a bit hard to swallow".

"They are needed to stabilise things but it's a bit tough to hear when the customers are missing out."

Mr Reid said the charge-out rates for the administrators contrasted to pay packets for Whitcoulls' staff.

"Whitcoulls paid the bottom rates in town - about $2 less than the market rate for shop assistants."

Pay experts contacted last night said the administrators' rates were on a par with those of other companies.

Mr Reid met the administrators yesterday to clarify the futures of the small group of employees his union represents.

He recommended workers stay put until the chain's future became clearer.

The administrators told the union their statutory goal was to achieve the maximum return for all creditors and to save jobs where possible.

They also said there had been some expressions of interest from potential buyers.

Mr Reid said it was not clear how many jobs would be lost, but redundancies seemed inevitable.

There was also some doubt as to when workers would be paid for the last week of work under REDgroup's ownership. Staff were due to be paid on Thursday.

The administrators have sent New Zealand staff letters telling them their wages will be paid and that, for now, it is business as usual.

- NZ Herald

Your views

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_n4 at 21 Oct 2014 11:33:48 Processing Time: 1622ms