Katies, Millers owner Mosaic Brands enters receivership, KPMG hired

Mosaic operates nine retail clothing brands with about 700 stores in Australia and New Zealand.

Retailer Mosaic Brands, which owns some of Australia’s iconic apparel brands like Rivers, Katies and Millers, has collapsed and KPMG has been appointed as receiver.

Also appointed as voluntary administrator is FTI Consulting, a move foreshadowed on September 30 by DataRoom, with the firm’s Vaughan Strawbridge, Kate Warwick, David McGrath and Kathryn Evans involved.

Working on the receivership for KPMG on behalf of lender Hillco, owed between $20m and $40m, is David Hardy, Gayle Dickerson, Ryan Eagle and Amanda Coneyworth.

Rival firm KordaMentha had also been positioning for the receivership role, say sources.

KPMG said in a statement released to the market that the appointment of the external administrators by the board follows what has been a difficult period for the business which has faced a number of structural challenges and disruptions relating to suppliers and inventory management.

“The Mosaic Group and the management team, led by chief executive Erica Berchtold (former boss of The Iconic), see this as a necessary process to reset and a pathway to accelerate its plans to focus on its core brands (Katies, Millers, Noni B and Rivers), resolve legacy issues and right size the store network to ensure the ongoing success of the business,” it said.

It comes as apparel chains come under increasing pressure, and as a result of the weak economic environment and cost of living crisis, are aggressively discounting stock.

Ms Berchtold said the priority was to rationalise and put plans in place to focus on the core brands.

KPMG Australia turnaround and restructuring partner David Hardy said the receivers would be overseeing the trading operations of the group, while the administrators would be seeking offers to recapitalise or acquire the Mosaic Brands Group.

The latest development comes after its bondholders last month agreed to new payment terms on debt owed by the embattled apparel company, and there’s talk that the situation could result in a deed of company arrangement to bail out the business involving key shareholders such as Spotlight and private equity firm Alceon.

Mosaic Brands earlier told the market it would focus on brands including Katies, Millers, Rivers and Noni B and exit Crossroads and Autograph. Picture: NCA NewsWire / Steven Saphore

Mosaic Brands earlier told the market it would focus on brands including Katies, Millers, Rivers and Noni B and exit Crossroads and Autograph.

The company has been in safe harbour protection through insolvency firm Deloitte as it fought for survival during the tough economic conditions.

Safe harbour law provisions protect directors from trading while insolvent to give a company time to reorganise its affairs.

DataRoom reported in September that Mosaic Brands was applying pressure on landlords to cut rents.

Mosaic Brands’ shares, which last traded at 3.6c, have been suspended from ASX trading since the start of August.

Negotiations had been unfolding with landlords – including Dexus Property, Westfield owner Scentre (both which has minimal exposure), Vicinity and Stockland – who were believed to be taking a tough stance.

Mosaic operates nine retail clothing brands with about 700 stores in Australia and New Zealand, as well as through online platforms.

It flagged it would report an operating earnings before interest, tax, depreciation and amortisation loss of between $5m and $10m and an earnings before interest and tax loss of between $15m and $20m for the year to June.

It also expected a loss for the first half of this financial year.

The disruption of migrating to a fully integrated logistics supply chain and distribution system with a newly appointed global partner has hurt the group.

Mosaic Brands said in a statement that a significant majority of its commercial partners supported the restructure, but a small number of parties declined the support, and a commercially acceptable resolution could not be reached with the Australian Competition and Consumer Commission.