Liquidation is looming for New Zealand's largest specialty music retailer Sounds, with the administrators of its parent company recommending it be wound-up.
In a report issued today (January 23), administrator BDO Spicers recommends that the collapsed home entertainment retail group Icon Digital Entertainment be liquidated, although a final decision will not be made until a formal "watershed" meeting of creditors is held Jan. 31.
Icon Digital, which operated 36 Sounds music stores in New Zealand, together with eight Blockbuster libraries and five Games Plus outlets, went into voluntary administration late last year with debts of more than NZ$25 million ($18.97 million).
BDO Spicers was unable to say exactly what return creditors can expect, but the firm states there is a shortfall in excess of NZ$10 million ($7.59 million) for secured creditors alone, so "it is clear that no funds will be available to unsecured creditors".
The business and assets of the company have been advertised for sale and so far the administrators have signed 12 confidentiality agreements with prospective buyers of certain aspects of the business. However, BDO Spicers declines to give any details of prospective buyers, citing commercial sensitivities.
Before Christmas, the administrator successfully applied for an extension of the voluntary administration period to allow stores to trade during the pre and post-Christmas period.
No details were given in the report about the performance of the outlets, but of the 22 Sounds outlets trading before Christmas, this week only six stores remained open.
Three Games Plus outlets have also been closed, along with one of Icon's Blockbuster stores, although the bulk of Blockbuster's franchise outlets - 37 in total - are not directly affected by the Icon collapse.
The report also reveals that the company has been in trouble virtually since its inception. Founder Steve Dods bought Sounds in May 2006 and formed Icon as a holding company for his various home entertainment assets.
However, in its first seven months of trading Icon lost NZ$3.7 million ($2.81 million) and despite restructuring and a further injection of cash, total losses by October 2007 had reached NZ$9.57 million ($7.27 million).