Troubled frozen desserts giant Sara Lee will not repay almost $10 million of debt it owes to its unsecured creditors, the ABC can reveal.
Unsecured creditors or lenders hold no security interest in Sara Lee's assets that can be forfeited for loan repayment in the event of liquidation.
Secured creditors are a priority for reimbursement.
The business, known for its frozen desserts such as apple pies and cheesecakes, is being sold to Klark and Brooke Quinn after the company went into administration in October.
The company owed creditors $55 million at the time, but administrators have told the ABC more than $9 million will not be repaid.
"There are insufficient funds to see unsecured creditors receive a return on their pre-appointment debt [owed before the company went into administration]," administrator Vaughan Strawbridge said in a statement.
"While we understand unsecured creditors will not be happy with the outcome for them, we have achieved the best outcome [for the] business."
Sara Lee was established in Lisarow on the New South Wales Central Coast in 1971.
Employees put before providers
Business owner Jeff, who did not want his last name to be used, is one of the small local businesspeople who will suffer a financial loss.
Jeff, who is an unsecured creditor, said he had been left more than $30,000 out of pocket after providing a service for Sara Lee last year.
"I feel a bit angry about the fact that somebody has taken my money that my staff and myself have earned," he said.
"I'm sad for my staff because, unfortunately, we weren't able to pay Christmas bonuses as a result of [this]."
He was also owed money from a service provided before the company went into administration, which meant he did not qualify for a repayment.
"Like many small businesses, we often don't understand what we need to do and what our legal rights are in regards to protecting ourselves from businesses like this that go into liquidation," Jeff said.
"It does impact on your mental health because you start to worry about how you're going to be able to run the business and how you're going to recover from that loss."
Mr Strawbridge said the company "unfortunately" had to prioritise paying back employees and secured debt first.
"Employees receive a 100 per cent return, either being paid or from their continued employment," he said.
"The business has $42.5m of secured debt, the repayment of which is required before there could be a return to unsecured creditors."
He said of the $13 million in unsecured debt, payments of $3.8 million had been made.
Jeff said he was just one of many businesses impacted by the decision.
"It's a pretty shocking amount of money," he said.
"When you consider there are a lot of small business people that have provided services here on the Central Coast that would be tied up in that $9 million."