ASX-listed video streaming and DVD rental company, Quickflix on Tuesday appointed Ferrier Hodgson as voluntary administrators.
Quickflix made the move after failing to lock down a deal with Stan Entertainment, owned by Nine Entertainment and Fairfax Media.
In a statement, Stephen Langsford, founder and CEO of Quickflix Limited, said an impediment to the company raising new capital was the existence of redeemable preference shares (RPS) held by Stan.
The shares were issued to American firm HBO in March 2011 for $10 million at the same time that Quickflix entered a commercial relationship with HBO. In July 2014, Nine acquired the shares from HBO for an undisclosed amount.
Langsford said that despite Quickflix being first to the streaming market and holding a leadership position in 2014, ongoing growth had required capital for continued investment in content and marketing.
“Neither Nine Entertainment nor Stan have ever participated in any capital raising to assist Quickflix’s growth, and its ability to raise capital from any source has been constrained by the RPS.”
In response, Quickflix restructured its business including securing release from over $7.5 million in obligations with content providers, and cost savings across operating and investment areas of over $5 million per annum.
Quickflix sought to negotiate with Stan to restructure the RPS over an extended period. Stan would only consider restricting the RPS under one of two conditions: Quickflix pay Stan $4 million in cash; or $1.25 million in cash plus all of its streaming customers.
“Neither alternative provides a viable option for Quickflix. In the first instance, Quickflix does not have the funds to make payments to Stan, nor does the company believe it can raise funds from investors for that purpose,” said Langsford.
“Neither alternative leaves Quickflix in a position to fund its unsecured creditors nor with capital necessary to take the business forward.”
Ferrier Hodgson will operate the Australian Quickflix business as usual. Quickflix’s New Zealand operation is not in voluntary administrator as is continuing to trade.
“The management of Quickflix remain dedicated to achieving a successful restructure through a deed of company arrangement that will reposition the listed group to a broader-based digital consumer, ecommerce and entertainment player leveraging its existing marketing database, data and platform while also pursuing M&A opportunities,” he said.