Restructuring - Australian Retail & Hospitality Series: Part 2 - Creative Restructuring Approaches: What’s Working in Retail & Hospitality Administrations

The retail and hospitality sector in Australia remains relatively steady in terms of financial performance. However, retailers, including those in hospitality, continue to be faced with some persistent headwinds and difficult trading conditions. In our three (3) part series, we cover some of the challenges facing Australian businesses in the sector, including those exposed to external administrations, the strategies that are working via administration, and how early intervention and turnaround strategies can help preserve long term enterprise value for stakeholders. 

Creative Restructuring Approaches – What’s Working in Retail & Hospitality Administrations

Despite the pressure facing retailers and hospitality operators, a growing number of voluntary administrations (VAs) are succeeding in preserving business value. The key? Restructuring creatively – and quickly.

Here’s how administrators we work with are using the tools available under the Corporations Act (and beyond) to create viable turnarounds in the consumer space.

Pre-Pack Sales and Day-1 DOCAs

A “pre-pack” sale – where a buyer is lined up before the administration begins – isn’t formally regulated in Australia, but in practice, many consumer business sales now follow this model. Administrators can execute a sale quickly post-appointment, preserving jobs and brand value. Similarly, pre-packaged Deeds of Company Arrangement (DoCAs) – especially those put to creditors within days of appointment – are increasingly common.

Operational Restructuring (with a scalpel, not an axe)

Many administrators now use VA to surgically reshape operations. This includes:

• Shutting unprofitable stores immediately.
• Renegotiating leases under the s.443B rent “holiday” period.
• Selling off surplus stock at cost to raise liquidity.
• Rationalising brands to focus on a core profitable offering.

In essence, what is put into practice is a “rationalise-to-survive” strategy but there is an art to it.

Engaging Digital Channels or Alternative Models

Consumer expectations are shifting. Administrators increasingly explore “digital pivot” options – moving to e-commerce or direct-to-consumer models to eliminate high fixed costs. In hospitality, some administrators have trialled ghost kitchens, delivery-only models, or franchising to reduce central overhead.

Stakeholder Deal-Making

Retail and hospitality VAs often succeed or fail based on stakeholder engagement. Administrations increasingly involve:

• Key landlords in DoCA negotiations.
• Suppliers in continued trade agreements with improved payment terms.
• Staff and unions to maintain morale and avoid reputational damage.

In some cases, administrators have raised debtor-in-possession style finance or involved private equity sponsors to recapitalise companies.

Innovating with Hybrid Deals

Newer VAs often involve hybrid outcomes: part sale, part DoCA, part managed wind-down. The aim is to extract value while protecting viable elements. While legal complexity increases, these hybrid deals can allow:

• Clean exits for investors.
• Asset sales to third parties.
• Continuity for loyal customers

In short: with the right strategy and swift execution, VA remains a powerful restructuring tool – but success now demands creative thinking, commercial flexibility, and open stakeholder dialogue.