Banks stand to benefit from appointing receivers at the retailer’s “high cash point” for the year.

Dick Smith's banks made a shrewd move in pulling the pin on the firm this week, as the retailer was at its "cash high point" for the year after Christmas and the Boxing Day sales, an Australian fund manager says.

A lending syndicate led by HSBC and National Australia Bank (NAB) put the embattled electronics seller - which owes roughly A$150 million - into receivership yesterday, appointing Ferrier Hodgson as receivers.

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In an online article, Forager Funds Management chief investment officer Steve Johnson said there would have been no better time for banks to make their move.


He said the Boxing Day sales would have bolstered Dick Smith's cash reserves, while most gift cards sold in the lead-up to Christmas would not yet have been redeemed.

"It seems counter-intuitive that a retailer could file for receivership at the high cash point of the year. But, if you are the bank and you have the ability to force the situation, there is no better time," Johnson said.

"Stop the clock today and the cash will end up in the banks' coffers. Wait another few weeks and a large chunk of it will be paid out to unsecured suppliers instead."

HSBC and NAB declined to comment.

Yesterday, Ferrier Hodgson receiver James Stewart said it would be "business as usual" at Dick Smith while a restructuring and sale process was undertaken.

We are immediately calling for expressions of interest for a sale of the business as a going concern.

"We are immediately calling for expressions of interest for a sale of the business as a going concern," he said, adding that employees would continue to be paid by the receivers.

However, he said that due to Dick Smith's dire financial position, gift cards would not be honoured and deposits would not be refunded.

Private equity firm Anchorage Capital paid A$94 million when it purchased Dick Smith from supermarket operator Woolworths in 2012.


The retail chain was floated on the stock market the following year with a market value of A$520 million, which had fallen to A$84 million by the time trading in the stock was halted on Monday.

Johnson said Dick Smith's working capital deficit on listing had left it in a "precarious position".

In another article published last year, Matt Ryan, also of Forager Funds, said Anchorage had funded its acquisition of the business largely through stripping out cash from Dick Smith's balance sheet.

Anchorage had pulled off "the greatest private equity heist of all time", Ryan said.

The retailer posted a 3.1 per cent rise in profit to A$43.3 million in its last financial year.

"Despite the supposed profits, free cash flow last financial year was negative A$35 million," Johnson said.

"That would undoubtedly be making banks and suppliers nervous."