Australian Fashion Labels seeking urgent sale after collapse

High-profile Adelaide company Australian Fashion Labels is in urgent talks with a suitor after collapsing into insolvency.

Melanie and Dean Flintoft co-founded Adelaide-based company Australian Fashion Labels.

Australian Fashion Labels is facing a “critical 48 hours” as administrators seek to strike a deal to keep the previously high-flying business alive.

The company was placed into voluntary administration this week, with administrator Marcus Ayres from Duff & Phelps saying urgent talks were being held with a suitor who had a good understanding of the business and had been in talks with directors and co-founders Melanie and Dean Flintoft.

The company’s brands include BNKR, Finders Keepers, C/MEO Collective, Keepsake and The Fifth Label.

Mr Ayres said the entitlements and pay of the 57 staff were up to date and salaries were paid up until the end of the week, but the ability of the company to trade through the administration was likely reliant on a deal being struck.

Mr Ayres is not revealing the debt figure owed at this stage but said there were three main secured creditors: Bendigo and Adelaide Bank, the Federal Government’s Export Finance Australia (EFIC) and Tigers Logistics.

Directors Melanie and Dean Flintoft from Australian Fashion Labels.

“This next 48 hours is critical, we’re pretty clear what the position is. We’re trying to lock down all the key suppliers to allow us to continue to trade,’’ Mr Ayres said.

“That’s critical for the next month. There is a suitor in the wings. Based on the preliminary discussions that we believe the director had with this party it would seem like we should make our best endeavours to try and keep the business operational and pursue that proposal.’’

Mr Ayres said there were still “a number of hurdles to get across” in the short term.

The company closed its flagship Rundle Mall store in 2019 with the loss of 15 jobs, as well as an outlet in Los Angeles, and flagged a move away from bricks and mortar retailing at the time.

At one stage the company employed about 110 people in Australia and internationally.

The State Government appears likely to be a creditor of the business’s failure, with funds still outstanding from a controversial $3.5 million government-backed loan awarded to the company by the Weatherill Labor Government.

Treasurer Rob Lucas confirmed that there were funds at risk however the quantum is not apparent at the moment.

The Unlocking Capital for Jobs Program, established in March 2015, was set up to underwrite loans for business expansions, however Aus Fashion Labels was the only company which ever used the program.

The State Government’s contribution was part of a $19 million debt package, with Bendigo and Adelaide Bank lending the rest of the funds.

Mr Ayres said the company had effectively no money in the bank and had been going through a restructure in a bid to reduce overheads.

This had led to the slimline, online-only model with fewer staff, but there still needed to be efficiencies in the process from taking designs through manufacturing and to sales in order for a sustainable business to emerge.

“COVID has really had an impact on the business’s sales. It’s really a sales issue,’’ he said.

“They’ve not been able to generate the sales they need to cover the overhead structure.

‘The business needs a recapitalisation and it can’t do that with the existing structures.

“It needs more working capital to improve some of the processes. For example the period between design, manufacture and sale.’’

Australian Fashion Labels’ website lists the company as having offices in Adelaide, Melbourne, Shanghai and Los Angeles.

The company’s two directors are Melanie and Dean Flintoft and it has a third, minority shareholder understood to be a family member.

2020 was a turbulent year for fashion retailers, with bricks and mortar stores across the nation forced to shut at various times because of COVID-19 lockdowns, while online shopping boomed for some operators.

Brands which went into administration last year include Seafolly, which was bailed out by private equity firm L Catterton, fashion designer Alice McCall, Dutch brand G-Star Raw and Jeanswest, which was sold back to its former owners early in the year.

Australian Fashion Labels has been contacted for comment.