Australian Fashion Labels will soon cease to exist with administrators saying it owes $12m

Adelaide’s Australian Fashion Labels is likely to be soon liquidated and owes $12m to creditors and staff – who have lost their jobs.

Directors Dean and Melanie Flintoft of Australian Fashion Labels.

Australian Fashion Labels has ceased trading, all staff have been made redundant and it is likely to soon be liquidated, its administrators say.

Duff & Phelps managing director Brett Lord, who is one of the administrators of the company, appointed in early January, said it had ceased operating.

Negotiations were ongoing with one party for the sale of some, unspecified assets, however the company, founded by Melanie and Dean Flintoft, was likely to soon be liquidated, Mr Lord said.

Mr Flintoft resigned from a new agency established by Adelaide City Council to market the CBD on Friday morning, before it had even met for the first time.

Australian Fashion Labels owes a combined $11 million to creditors, with the three main secured creditors being Bendigo and Adelaide Bank, the Federal Government’s Export Finance Australia (EFIC) and Tigers Logistics.

The company employed 57 staff who were paid up until the administration started and for a number of days after that, however with no funds left to pay them all were let go soon after.

The company’s website, where its brands including Finders Keepers, C/MEO Collective, Keepsake and The Fifth Label, has been shut down.

South Australian taxpayers are also likely to be on the hook, with Treasurer Rob Lucas saying earlier this month that unspecified funds were still outstanding from a $3.5 million loan advanced to the company by the former Weatherill Government.

Mr Lord said the money owed to staff included about $1 million in superannuation, annual leave and redundancy entitlements.

“The company’s in administration at the moment and will likely to proceed into liquidation in a couple of weeks’ time,’’ he said.

“We had to close the business down in the first week of administration, there was simply no funding to keep it going.

“But we have reached a heads of agreement and we’re in exclusivity with a party to buy certain of the assets of the business.

“That will play out over the next couple of weeks I expect.’’

Australian Fashion Labels director Melanie Flintoft at their Adelaide design studio in 2017.

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

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.

The State Government is a creditor, 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 said he would release the amount owed at a later date when the process had become clearer.

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 that 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 Lord and fellow administrator Marcus Ayres said earlier this month the company 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.’’

A report to creditors is expected early next month.

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 could not be contacted.