Dick Smith sends customers an open letter

Dick Smith has posted an open letter to customers that says the chain is "under new management" (that would be the administrator, receivers and new CEO installed by the receivers) and "working toward a brighter future".

It contains one piece of hard information: that "if you purchase products during the receivership of Dick Smith and we are unable to quickly repair or replace it, we will provide a refund, no questions asked."

That's a nice pledge, but in essence just confirming the company will fulfill its obligations under the Consumer Guarantees Act.

What's missing
Amid all its PR platitudes, the letter does not cover gift vouchers or deposits, something an angry social media mob was quick to pick up on. The receivers have said they will not honour either. Consumer CEO Sue Chetwin has called for those who hold gift cards, or who are owed deposit money, to be treated as secured creditors in the event of a receivership or for the money to at least be held in a trust. As things stand, Ms Chetwin says customers can try for a chargeback through their bank.

Hopefully market forces will come into play here. If whoever buys Dick Smith wants to win back customer trust and favour, honouring gift cards and deposits is the obvious place to start.

Neither does the open letter cover the vexed question of extended warranties, or where customers have paid extra for warranties that last more than the standard one year for many items (note the Consumer Guarantees Act effectively gives you an extended warranty anyway with its requirement that goods last for a reasonable period of time).

It seems those who bought an extended warranty between October 1 and January 4 could be out of pocket.

A legal document on Dick Smith's website says (with NBR's bolding):

"For extended warranty purchased prior to 1 October 2015 the receivers understand that this cover remains valid. Please refer to the Extended Warranty brochure, provided at the time of purchase, for details regarding your rights available under the Extended Warranty.

For extended warranty purchased during the period 1 October 2015 to 4 January 2016 [the day the chain went into receivership], this cover is currently under consideration by the external provider [The Warranty Group Australasia Pty Ltd] and is expected to be resolved shortly.

For extended warranty purchased on or after 5 January 2016, this cover remains valid. Please refer to the Extended Warranty brochure, provided at the time of purchase, for details regarding your rights available under the Extended Warranty."

Creditors' meetings on both sides of the Tasman this week were told Dick Smith owes around $A135 million to two secured creditors (presumably NAB and HSBC) and around $A250 million to unsecured creditors including trade creditors, landlords, customers with gift cards or lost deposit payments, and staff (in the form of holiday pay owning. Australia staff are protected by the government's Fair Entitlements Guarantee scheme; a FAQ written by receivers for NZ staff says they will be updated on their entitlement situation "in due course").

The receivers (James Stewart, Jim Sarantinos and Ryan Eagle of Ferrier Hodgson) say more than 40 parties have now expressed interest in buying the retail chain.

However, Waterstone Involvency's Damien Grant, who attended the Auckland leg of the two creditors' meetings (media were not allowed in), said it seemed unlikely the sale would reach the $A135 million owed to secured creditors, let alone the $A385 million or so required to cover unsecured creditors as well.

Those kicking the tyres should check out Dick Smith's financial's in NBR's earlier story here.