Mosaic Brands will unlikely be able to pay its creditors, including suppliers and landlords, for goods and services supplied before October 28 last year, when the fashion retailer entered administration and receivership.
Even secured creditors look to be out of pocket.
“There is not expected to be sufficient funds from the realisation of assets to pay amounts owed to secured creditors in full,” said FTI Consulting, the voluntary administrators of Mosaic Brands.
The announcement comes after Mosaic Brands receivers KMPG failed to find a buyer for the business, leading to the closure of all the company’s stores in mid-April.
FTI Consulting noted that the receivers are “cautiously optimistic” that the salaries owed to Mosaic Brands employees will be paid in full, but the timing remains unknown.
Mosaic Brands owes around $318 million to creditors, including $36 million to senior secured creditors and $18 million in secured convertible loan notes, excluding accrued interest and fees. About $22 million is owed to priority Unsecured Creditors, debts including annual leave, long-service leave, redundancy and superannuation.
A further $242 million is owed to unsecured creditors, including suppliers and landlords – and that figure excludes items such as gift card obligations and claims by landlords for breaches of lease agreements.
In the update, FTI Consulting says it expects there will only be enough money from the sale of the Mosaic Group’s assets – largely stock – to pay priority unsecured creditors in full, most likely leaving long-serving staff out of pocket and suppliers and landlords with nothing.
It added that one possibility of paying the company’s unsecured creditors is if Mosaic Brands is placed into liquidation and the liquidator successfully recovers funds from potential legal actions.
The only other possible course is if a party proposes a deed of company arrangement (DOCA) and agrees to pay money into a fund that would pay a portion of the amounts owed to suppliers and unsecured creditors. However, no DOCA proposal has been received to date.
A second creditors meeting will be held in May or June.
Meanwhile, separate negotiations are underway for the sale of Mosaic Brands’ intellectual property and brand names.
