South Australian company Epicurean Distribution, the sales arm of exotic mushroom grower Epicurean Food Group, fell into administration with debts of close to $5 million in November following a sales slump.

In his report, administrator Stuart Otway of SV Partners said his preliminary investigations suggested the company, which had 10 staff, may have been trading while insolvent since the end of June.

As previously reported by news.com.au, mushroom sales fell sharply following news of the lunch that killed three diners in July in rural Melbourne.

Erin Patterson was charged with murder in November after she cooked a mushroom meal that left three people dead and one person in hospital.

Mr Otway said the sales downturn played a major role in Epicurean Distribution’s collapse.

The company was still in a growth phase and “the mushroom poisoning in Victoria has also impacted the demand for the group’s products,” he said.

Epicurean Distribution is continuing to trade ahead of a creditors meeting on January 8, where Mr Otway is recommending creditors accept a deed of company arrangement (DOCA) proposal put forward by Epicurean director Leanne McGrath that would see them receive a return of between 15 to 24 cents for every dollar they are owed.

As part of the DOCA, a director of Epicurean’s major backer, North Lake Investments – which is owed $4.4 million by the company – has agreed to contribute $250,000 to a fund that would be used to repay other creditors.

Mr Otway said North Lake Investments has already provided more than $4 million in funding to Epicurean Food Group.

According to the Australian Securities and Investments Commission (ASIC) the directors of North Lake Investments are Shawn Hutchinson and Lisa Hutchinson.

“The private lender encountered some personal issues which prevented further funds being made available to the group,” Mr Otway said.

“Based on discussions with one of the directors of the investor, he believes in the business concept and potential of EFG.”

If creditors vote against the DOCA proposal, the company, and other Epicurean Food Group businesses will likely be put into liquidation and creditors are unlikely to receive anything due to a lack of assets, Mr Otway said.

Epicurean Food Group is led by Dr McGrath and her husband Kenneth King, a 40-year veteran in fresh food engineering.

It grows mushroom varieties such as oyster, shiitake, enoki, king oyster and lion’s mane, with its mushrooms and mushroom-based products sold in SA Foodland stores and specialty retailers, and had hoped to secure deals with Coles and Woolworths.

Ms Patterson was charged with three counts of murder and five counts of attempted murder in November after allegedly serving a death cap mushroom-laced beef wellington which killed her former parents-in-law Don and Gail Patterson, and Gail’s sister, Heather Wilkinson.

The five counts of attempted murder relate to Mrs Wilkinson’s husband, Ian Wilkinson, who survived eating the ill-fated meal, along with allegations she had tried to kill her ex-husband, Simon Patterson, on four other occasions.

Erin Patterson denies any wrongdoing, and claims the mushrooms she used in the dish were a combination of button mushrooms bought at a supermarket chain and dried ones purchased from an Asian grocery store in Melbourne.